Hi,

I am having a problem answering this particular question...

ABC corp. signs an agreement on Jan 2, 2004, to lease delivery equipment for a 5-year period. The current market value of the delivery equipment on Jan. 2, 2004 is $225,000. The lease agreement calls for annual payments of $50,040. The first payment is made on january 2, 2004, all other payments are made on Dec 31 of eah year. The lease agreement calls for an 8% interest rate. The estimated remaining life of the delivery equipment is six years. Ownership of the delivery equipment will transfer to DEF corp at the end of the lease term.

I have to prepare a journal entry on Jan 2, 2004, to record the lease agreement and make the first lease payment. I also have to prepare the entry on Dec. 31, 2004, to record the second lease payment and the accrual of interest.

Please Help!
Laura