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4 October, 05:15

Wilson foods corporation leased a commercial food processor on september 30, 2018. the five-year finance lease agreement calls for wilson to make quarterly lease payments of $195,774, payable each september 30, december 31, march 31, june 30, with the first payment at september 30, 2018. wilson's incremental borrowing rate is 12%. wilson records amortization on a straight-line basis at the end of each fiscal year. wilson recorded the lease as follows:

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  1. 4 October, 05:23
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    The journal entry to record the lease would be:

    Debit Credit

    Asset $3,000,000

    Lease Payable $3,000,000

    Debit Credit

    Lease Payable $195,774

    Cash $195,774

    Explanation:

    To prepare the journal entry to record the lease we would have to calculate the present value of lease payments as follows:

    present value of lease payments=$195,774*15.32380=$3,000.000

    Therefore, the journal entry to record the lease would be:

    Debit Credit

    Asset $3,000,000

    Lease Payable $3,000,000

    Debit Credit

    Lease Payable $195,774

    Cash $195,774
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