On 1/1/x6 two firms signed a lease to be capitalized by the lessee. The lease calls for annual payments of $4,000 to be made each Dec. 31 during the four year lease. The asset reverts to the lessor at the end of the lease at which time it is expected to be worth $500. The market value and book value of the asset at inception is $14,950. The interest rate is 4%. The lessee uses SL depreciation. (pva, 4%, 4) = 3.6299. (pv1, 4%, 4)=0.8548
Prepare all the JEs for the lessee for 20x6, the first year of the lease.