Marcos Inc. leased a new machine from East Inc. on June 1, 2020, under the...
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Accounting
Marcos Inc. leased a new machine from East Inc. on June 1, 2020, under the following conditions:
Lease Term - 10 years Annual rental payable at the beginning of each lease year - $40,000 Useful life of the machine - 12 years Implicit interest rate of the lease - 14% Present Value factor for an annuity of 1 in advance for 10 periods at 14% - 5.95
There is no option to purchase the machine and lease is non-cancelable.
Required
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What is the type of this lease for Marcos Inc. as being the lessee of the lease agreement?
Please explain your reasoning for the type of the lease agreement.
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What is the necessary journal entry for Marcos Inc. on June 1, 2020.
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