Question: on jan 1 2017 hudson leased a construction crane to...
On Jan 1, 2017, Hudson leased a construction crane to Omega, Inc. for a nine year period at which time possession of the leased asset will revert back to Hudson. the cost and the fair value of the cranes is $420,000 and its expected useful life is ten years. Hudson expects a residual value of 20,000 for the equipment, but Omega does not guarantee any specific amount. Equal Payments under the lease are 60,000 and are due on Jan 1st of each year. Omegas incremantal borrowing rate is 9% and Hudson Incremental borrowing rate is 6%. The interest rate implicit in the lease set by hudson is 7.6308%, but this rate is not known to omega, Inc. Both companies use straight-line depreciation.
a) determine the nature of this lease for omega, Inc. List and check all criteria
b) prepare all journal entires related to the leasing agreement for omega ,inc. From Jan 1,2016 to Jan 1. 2018.