Roadway Entity (RE) leases a road grader from Big Equipment Entity (BEE). RE agrees to pay $40,000 at the end of each year for 5 years. The equipment has a useful life of 6 years. The implicit rate of the lease is 6% and the lease contains a guaranteed residual value of $30,000. The lease is appropriated classified as a finance lease.
-Prepare RE's journal entry to record the initial recognition of the leased asset.
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