1. The lease term is 4 years. The lease is noncancelable and requires annual rental payments of $20,000 to be paid in advance at the beginning of each year. 2. The cost, and also fair value, of the heavy equipment to Scott at the inception of the lease is $68,036.62. The equipment has an estimated life of 4 years and has a zero estimated residual value at the end of this time. 3. Adden agrees to pay all executory costs. 4. The lease contains no renewal or bargain purchase option. 5, Scott's interest rate implicit in the lease is 12%. Adden is aware of this rate, which is equal to its borrowing rate. 6. Adden uses the straight-line method to record depreciation on similar equipment. 7. Executory costs paid at the end of the year by Adden are: 2016 Insurance, $1,500 Property taxes, $6,000 2017 Insurance, $1,300 Property taxes, $5,500 DATE ACCOUNT TITLE POST. REF DEBIT CREDIT Jan.1 Leased Equipment 68,036.62 Capital Lease Obligation 68,036.62 an. 1 Capital Lease Obligation 20,000.00 Cash 20,000.00 Dec.31 Interest Expense Accrued Interest on Capital Lease Obligation Dec.31 Cash Dec. 31Depreciation Expense Accumulated Depreciation DATE ACCOUNT TITLE POST. REF DEBIT CREDIT Jan. 1 Accrued Interest on Capital Lease Obligation Capital Lease Obligation Cash 20,000.00 Dec.31 Depreciation Expense Accumulated Depreciation Dec.31 Interest Expense Accrued Interest on Capital Lease Obligation Dec. 31 Cash