Question - P&G Company leased equipment from BBC on January 1, 2015. Rust manufactured the equipment at a cost of $90,000.
Other information:
Lease term: 3 years
Annual payments: $40,000
Life of asset: 3 years
Fair value of assets: $111,332
Implicit interest rate: 8%
Incremental rate: 8%
There is no expected residual value.
Required: Prepare appropriate journal entries for BBC Leasing for 2015. Assume a December 31 year-end.