Problem: On January 1, 2020, Mosaic Madness Productions leased technology equipment from Prime Leases. Prime Leases purchased the equipment from Orange Technologies at a cost of $132,000 The lease requires 6 annual payments of $27,553, beginning January 1, 2020 and at each January 1 thereafter through the end of the lease. The estimated useful life of the equipment is six years, and the interest rate in this financing agreement is 10%, which provides a present value of the rental payments of $132,000.
1. How would Mosaic Madness Productions account for the lease on their 2020 financial statements?
2. What would be included in the January 1, 2020 journal entry made by Mosaic Madness related to the lease? cr. Account title dr. amount 2. dr. Right of Use Asset cr. amount 3. cr. Lease Liability dr. account name cr. amount 4. cr. Cash 1. What would be included in the December 31, 2020 journal entry made by Mosaic Madness related to the lease?