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On January 1, 2014, ABC INC

question 212

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On January 1, 2014, ABC INC.leased a machine to MNO.The lease was for a 10-year period, which approximated the useful life of the machine.ABC INC.purchased the machine for $120,000 and expects to earn a 10 percent return on its investment, based upon an annual rental of $17,754 payable in advance each January 1st.Assuming that the lease was a direct financing lease, what should be the interest entry on ABC INC.'s books on December 31, 2014?


Definitions:

Corporation

A corporation is a legal entity that is separate and distinct from its owners, offering limited liability protection to its shareholders, and is capable of owning property, entering into contracts, and being taxed.

Income Taxes

Taxes imposed by the government on the income earned by individuals and corporations.

Partnerships

A business structure where two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Agreement.

Common Stock

Equity securities representing ownership interests in a corporation, providing voting rights and a share in the company's profits.

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