Bolton Co.leases workout equipment to health clubs.On January 1, Year 1, Bolton Co.leases to Powerhouse Gym, equipment valued at $150,000, for 2 years.The equipment has a 12-year life with zero salvage value.The lease payments equal $2,500 per year, payable on the last day of the year.
Required:
a.Identify the type of lease.Give reasons for your conclusion.
b.State the correct entries to be made by the lessor for this lease.You may assume straight-line depreciation is used by Bolton.

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The Answer of Bolton Co.leases workout equipment to health clubs.On January 1, Year 1, Bolton Co.leases to Powerhouse Gym, equipment valued at $150,000, for 2 years.The equipment has a 12-year life with zero salvage value.The lease payments equal $2,500 per year, payable on the last day of the year.
Required:
a.Identify the type of lease.Give reasons for your conclusion.
b.State the correct entries to be made by the lessor for this lease.You may assume straight-line depreciation is used by Bolton.

Bolton CoLeases Workout Equipment to Health Clubs