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1. Hills Corporation owns equipment that cost $80,000 and has a useful life of 8 years with no salvage value. On January 1, 2017, Hills
1. Hills Corporation owns equipment that cost $80,000 and has a useful life of 8 years with no salvage value. On January 1, 2017, Hills leases the equipment to Holland, Inc. for 1 year with one rental payment of $15,000 on January 1. (a) Prepare Hills Corporation's 2017 journal entries. 2. Holland Co. as lessee records a capital lease of machinery on January 1, 2018. The seven annual lease payments of $875,000 are made at the end of each year. The present value of the lease payments at 10% is $4,260,000. Holland uses the effective-interest method of amortization and sum-of-the-years'-digits depreciation (no residual value). Instructions (Round to the nearest dollar.) (a) Prepare an amortization table for 2018 and 2019. (b) Prepare all of Holland's journal entries for 2018. 3. Pacific Corporation manufactures replicators. On January 1, 2017, it leased to Hills Company a replicator that had cost $110,000 to manufacture. The lease agreement covers the 5-year useful life of the replicator and requires 5 equal annual rentals of $40,800 payable each January 1, beginning January 1, 2017. An interest rate of 12% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs. (a) Prepare Pacific's January 1, 2017, journal entries
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