The Colossal Freight Company needs two new trucks, each of which has an estimated service life of nine years. The trucks could be purchased for \(\$ 149,000\) each, but Colossal does not have enough cash to pay for them. Instead, Colossal agrees to lease Truck 1 for six years, after which the truck remains the property of the lessor. In addition, Colossal agrees to lease Truck 2 for eight years, after which the truck remains the property of the lessor. According to the lease contracts, Colossal must pay \(\$ 30,000\) annually for each truck ( \(\$ 60,000\) for two trucks), with the payments to be made at the end of each lease year. Both leases were signed on December 31, 1989, at which time the prevailing interest rate available to Colossal for equipment loans was \(12 \%\).

\section*{Required}

(Round all amounts in your answers to the nearest whole dollar.)

1. Prepare any required entries to record the lease of

(a) Truck 1 and

(b) Truck 2 .

2. Prepare the required entries as of the end of the first year in

(a) the life of Truck 1 and

(b) the life of Truck 2. Use straight-line depreciation.

3. Truck 1 was returned to the lessor on December 31, 1995, the end of the sixth year. Prepare the required entries as of the end of the sixth year in

(a) the life of Truck 1 and

(b) the life of Truck 2.

4. Show how Truck 2 and the lease liability for the truck should appear on the balance sheet as of the end of the sixth year in the life of the lease (after the year-end lease payment).