What is the lease inception date?
The lease inception date is considered to be the earlier of either the date of the lease agreement or the lease commitment date (in writing). The lease inception date is when the company must record the lease liability and begin to record lease expense.
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What is the journal entry to record the finance lease on the lease inception date?
On the lease inception date, the company debit right of use (ROU) asset and credit lease liability for the net present value of future minimum lease payments. The visual below shows the journal entry for a lease that has a net present value of future minimum lease payments of $60,000.