ARE THESE JOURNAL ENTRIES CORRECT??? What would the lesses\'s journal entries be

Question

ARE THESE JOURNAL ENTRIES CORRECT???

What would the lesses's journal entries be in year #1 be to record the lease and payment, etc.? 

DATA:

Leased equipment on January 1, 2007, for 3 years.

Lease payments of $100,000

Other expenses (e.g., insurance, taxes, maintenance) are also to be paid = $2,000 per year.

The lessor did not incur any initial direct costs. The lease contains no purchase or renewal options and the equipment reverts back to Lessor Inc. on the expiration of the lease.

Useful life of the equipment is 4 years.

The fair value of the equipment at lease inception is $265,000.

Lessee has guaranteed $20,000 as the residual value at the end of the lease term.

The salvage value of the equipment is expected to be $2,000 after the end of its economic life.

The lessee’s incremental borrowing rate is 11 percent.

Lessor’s implicit rate is 10 percent and is calculable by the lessee from the lease agreement.

ARE THESE JOURNAL ENTRIES CORRECT???

Explanation / Answer

Yes absolutely...

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