ML Leased a Computer to LH on January 1, 2014

question 180

Essay

ML leased a computer to LH on January 1, 2014.The lease was a five year fixed, non-cancellable agreement.The payments were finalized at $2,380 per year with the first payment on January 1, 2014 and ML paid $9,500 for the computer.Carrying value is equal to fair value.The lease is deemed a finance lease.Based on the above information, what type of lease is this for the lessor.Prepare the journal entries for at the inception of the lease using the gross method.

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Definitions:

Instruction Set

The collection of commands that a specific CPU can execute. Each CPU has its own unique instruction set.

Machine Code

The lowest level of software, consisting of binary instructions directly executable by a computer's CPU.

Hydrogen Bond

Weak bond that arises between a slightly positive hydrogen atom of one molecule and a slightly negative atom of another molecule, or between parts of the same molecule.

Water Molecule

A molecule composed of two hydrogen atoms and one oxygen atom, essential for life.