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On June 30, 2024, Cougar, Inc., leased medical equipment from TechMed, Inc. The lease agreement...

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Accounting

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On June 30, 2024, Cougar, Inc., leased medical equipment from TechMed, Inc. The lease agreement calls for Cougar to make semiannual lease payments of $457,188 over a three-year lease term, payable each June 30 and December 31 . with the first payment on June 30,2024 . On June 30,2027 , at the end of the three-year lease term, the equipment is expected to be worth $105,000, and Cougar has the option to purchase it for $85,000 on that date. Cougar's incremental borrowing rate is 10%, the same rate TechMed used to calculate lease payment amounts. TechMed, Inc manufactured the equipment at a cost of $2.5 million. Required: 1. How should this lease be classified? 2. Prepare the journal entries for Cougar Inc. at the beginning of the lease on June 30, 2024. 3. Prepare the journal entries for TechMed at the beginning of the lease on June 30, 2024. 4. Prepare the appropriate entries related to exercise of the purchase option on June 30, 2027

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