Problem
On January 1, Year1, A Corporation leased equipment to B Corporation under a direct financing lease designed to earn A Corporation a 10% rate of return for providing long-term financing. The lease agreement specified:
1.10 annual payments of $54,000 are due each December 31, at the end of the lease year
2. The $54,000 includes executory costs of 4,000 per year. The $4,000 of executory costs reimburse the lessor for maintenance costs
3.It is a capital lease and the present value of the minimum lease payments for both lessee and lessor was $307,229
Record the journal entry for the $54,000 cash payment made by the lessee on December 31, Year1.