On January 1 2017 Muddle Inc entered into an agreement to le

On January 1, 2017, Muddle Inc. entered into an agreement to lease equipment from Albert Corporation. The lease agreement requires five annual rental payments of $90,000 beginning December 31, 2017. The present value of the rental payments is $342,117. The lease transfers substantialy alil the benefits and risks of ownership to Muddle. Prepare the entry to record the lease agreement on the books of Malcolm Inc. on January 1, 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually) Date Account Titles and Explanation Debit Credit Jan. 1

Solution

Journal entry: Date Accounts title and exxplanation Debit $ Credit $ Jan1 2017 Lease Assets Account Dr. 342117       Lease liability Account 342117