On January 1, 2019, Idea Company leases certain property to Common Company at an annual...
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Accounting
On January 1, 2019, Idea Company leases certain property to Common Company at an annual rental payment of $60,000 payable in advance at the beginning of each year for 8 years. The leased property which is new, costs $275,000, and has an estimated economic life of 8 years with no residual value. The interest rate implicit in the lease is 12% and the lease is non- cancelable. Idea Company has no other costs associated with this lease. The present value factor is 5.563. Required
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What is the type of the lease agreement for Idea Company? Please explain your reasoning.
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Please make the journal entries necessary for Idea Company when the lease agreement is signed on January 1, 2019.
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