(Answered) Question lessee entries capital lease on january 1 2008

Accounting

Question: (Lessee Entries; Capital Lease) On January 1, 2008, Burke Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $8,668 at the beginning of each year, starting January 1, 2008. The machine has an estimated useful life of 6 years. The machine reverts back to the lessor at the end of the lease term. Burke uses the straight-line method of depreciation for all of its plant assets. Burke's incremental borrowing rate is 10%, and the Lessor's implicit rate is unknown.

Instructions: (a) What type of lease is this? Explain.

(b) Compute the present value of the minimum lease payments.

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