The journal entry to record the initial transaction (Right of Use Asset and Lease Liability of $50,000) for Ely Roofing Contractors, who enters into a lease for the use of new equipment for 3 years at an annual lease payment of $6,000 is as follows:
<h3>Journal Entry:</h3>
Debit Right of Use Asset $50,000
Credit Lease Liability $50,000
- To record the initial transaction of the Lease Liability and the Right of Use Asset.
<h3>How to record the initial lease transactions?</h3>
The present value of annual lease payments is first computed.
With this figure, the recording of the asset and liability is completed by debiting the Right of Use Asset and crediting the Lease Liability account.
<h3>Data and Calculations:</h3>
Annual lease payment = $6,000
Present value of lease payments = $50,000
Economic life of the equipment = 5 years
Lease term = 3 years
Nature of lease = finance lease
<h3>Initial Transaction Analysis:</h3>
Right of Use Asset $50,000 Lease Liability $50,000
Learn more about recording the initial transaction of a finance lease at brainly.com/question/16646812
