Terms of a Lease Agreement and Related Facts Are

Essay

Terms of a lease agreement and related facts are:
a. Leased asset has a retail cash selling price of $200,000. Its useful life is six years.
b. Annual lease payments at the beginning of each year are $41,746, beginning January 1. The lease term is six years.
c. Lessor's interest rate when calculating annual lease payments was 9%.
d. Direct costs by the lessor of legal and commissions to execute the completed lease are $4,124.
Required:
Round your answers to the nearest whole dollar amounts.
Prepare the appropriate journal entries for the lessor to record the lease, the initial lease payment at its commencement, and at the December 31 fiscal year-end under each of the following two independent assumptions:
1. The lessor recently paid $200,000 to acquire the asset.
2. The lessor recently paid $170,000 to acquire the asset.