question eastern edison company leased equipment from low tech leasing on january 1 4285674

Question

Eastern Edison Company leased equipment from Low-Tech Leasing on January 1, 2016. Low-Tech purchased the equipment at a cost of $271,910.

Other information:

Lease term 4 years

Annual payments $77,000 on January 1 each year

Life of asset 4 years

Fair value of asset $271,910

Implicit interest rate 9%

Incremental rate 9% There is no expected residual value.

Required: Prepare appropriate journal entries for Low-Tech Leasing for 2016. Assume a December 31 year-end. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)