### Journal entries at the inception of the lease

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Water world Company leased equipment from Costner Company. The lease term is 4 years and requires equal rental payments at the beginning of each year. The equipment has a fair value at the inception of the lease of \$150,000, an estimated useful life of 4 years, and no salvage value. Water world pays all executor costs directly to third parties. The appropriate interest rate is 10%. Prepare Waterworld’s January 1, 2014, journal entries at the inception of the lease. (Hint: you must calculate the amount of the lease payment)

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