Adam Limited and Davies Limited enter into a finance lease agreement with the following terms:
- lease term is 3 years
- estimated economic life of the leased asset is 6 years
- 3 × annual rental payments of $23 000 each payment is one year in arrears
- residual value at the end of the lease term is not guaranteed by the lessee
- interest rate implicit in the lease is 7%.
The journal entry recorded by the lessee when the payment is made at the end of the first year is:

Question

Quizplus · Accepted Answer

The Answer of Adam Limited and Davies Limited enter into a finance lease agreement with the following terms:
- lease term is 3 years
- estimated economic life of the leased asset is 6 years
- 3 × annual rental payments of $23 000 each payment is one year in arrears
- residual value at the end of the lease term is not guaranteed by the lessee
- interest rate implicit in the lease is 7%.
The journal entry recorded by the lessee when the payment is made at the end of the first year is:

Adam Limited and Davies Limited Enter into a Finance Lease