Assume that IBM leased equipment that was carried at a cost of $178,000 to Sandhill Company. The term of the lease is 7 years December 31, 2019, with equal rental payments of $30,868 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $178,002. The equipment has a useful life of 7 years with no salvage value. The lease has an implicit interest rate of 7%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Assume the sales-type lease was recorded at a present value of $178,002.
Required:
Prepare IBM's December 31, 2017, entry to record the e ansaction with Sandhill Company.
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