On 1/1/06, hall inc entered into a lease agreement with Oates co. Hall leased a machine from Oates for 9 years. The estimated useful life of the machine is 10 years. At the end of the 9 year lease term, ownership of the machine transfer back to Oates. The lease payments of $15000 annual beganing 1/1/06. Hall's borrowing rate is 13% and Oates is 10% which is known to hall.
Journal entries for the first year
1/1/6 and 12/31/6