Essay
On January 1, 2014, a lessor and lessee signed a lease calling for 5 annual payments of $10,000 to be made starting on December 31, 2014.The market value and book value of the asset at inception is $41,013.The lessee also guarantees the full $5,000 residual value at December 31, 2018, the end of the lease term.Both parties use 10%.The lessee uses straight-line depreciation.Provide the first year (2014)entries for both lessor and lessee.Assume there are no uncertainties concerning collection of lease payments by lessor, nor unreimbursable costs of lessor.
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