Fair Value Cap: Christal Corporation leased equipment from Henan Leasing Limited for three years at \(\$ 30,000\) per quarter. The lease begins on 1 May 20X5. Payments are due at the end of each lease quarter (that is, the first payment will be due on 31 July 20X5). The fair value of the equipment is \(\$ 300,000\). Christal Corporation's fiscal year-end is 31 December, and its incremental borrowing rate is \(8 \%\) per annum. The equipment will be depreciated at a declining-balance rate of \(30 \%\). The first year's depreciation of the leased asset will be proportional.

Required:

1. In general journal form, prepare the appropriate entries at the inception of the lease.

2. Using a financial calculator or a computer spreadsheet, calculate the interest rate implicit in the lease for the lessee.

3. What will be the lease liability balance (including accrued interest, if any) on 31 December 20X5?