Problem related to direct-financing lease

Reference no: EM13147040

On January 2,2011,Gold Star Company leases equipment to Brick Co.with 5 equal annual payments of $40,000 each,payable beginning December 31,2011.Brick Co. agrees to guarantee the 25,000 residual value of the asset at the end of the lease term. Brick's incremental borrowing rate is 10%,however it knows that Gold Star's implicit interest rate is 8%.What journal entry would Gold Star make at January 2,2011 assuming this is direct-financing lease?

Reference no: EM13147040

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