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On January 1, 2020, Smith Industries leased equipment to a customer for a four-year period,...

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Accounting

On January 1, 2020, Smith Industries leased equipment to a customer for a four-year period, at which time possession of the leased asset will revert back to Smith. The equipment cost Smith $300,000 and has an expected useful life of five years. Its normal sales price is $300,000. The unguaranteed residual value after four years is $50,000.

Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. The interest rate is 5%. Prepare the Journal Entry for Smith Industries on Januray 1,2020.

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