We-Lease-All,Inc

question 20

Essay

We-Lease-All,Inc.leased a chroming machine to Fernando's Choppers.The lease qualifies as a direct financing lease and requires lease payments of $74,502 per year,payable in advance,over a ten-year period.There is no expected residual value.The fair market value of the packing machine is $430,000--the same amount paid by Choppers to purchase the asset.The lease term begins on January 1,2014.
Provide the journal entries required on Choppers' books to
(1)record the lease transaction and the first lease payment.
(2)recognize interest revenue at the end of the first year.Washington uses a calendar-year accounting period.(Round all computations to the nearest dollar.)

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Definitions:

Stroma

The supportive tissue of an epithelial organ, tumor, gonad, etc., consisting of connective tissues and blood vessels.

Photon

A quantum of electromagnetic energy, often viewed as a particle of light with no mass that exhibits both wave and particle properties.

Wavelength

The distance from one wave peak to the next; the energy of electromagnetic radiation is inversely proportional to its wavelength.

Photosynthesis

The method through which green plants and certain other organisms utilize sunlight to create nutrients from carbon dioxide and water.