(Lessee Computations and Entries; Capital Lease with Guaranteed Residual Value) Assume the same data as in P21-13 and that Craig Gocker Medical Center has an incremental borrowing rate of 10%.

Instructions

(Round all numbers to the nearest dollar.)

(a) Discuss the nature of this lease in relation to the lessee, and compute the amount of the initial obligation under capital leases.

(b) Prepare a 10-year lease amortization schedule.

(c) Prepare all of the lessee’s journal entries for the first year.