The Following Information Relates to a Lease Contract: Lease Inception

The following information relates to a lease contract: Lease inception = 1-1-x1
Market value and book value (to lessor)of New equipment under lease = $10,000 Interest rate used by both lessee and lessor The lease allows the lessee to purchase the asset for $200 on 1-1-x4.
There are no uncertainties with respect to collectability of lease payments, or performance by lessor.
(a)Determine the annual lease payment
(b)Classify the lease for the lessee
(c)Record the 2014 entries

Correct Answer:

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(a)$10,000 = LP (PVA,.10, 3)+ $200(PV1,....

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