1. Wildcat Company leased a machine from Basket Leasing Company. The lease is for 4 years. The life of the asset is 4 years. The terms of the lease require 4 payments of $100,000 at the beginning of the year, beginning on January 1, 2017. The lease is non-cancelable. Wildcats incremental borrowing rate is 8%. Baskets earnings rate is 6%, but Wildcat does not know Baskets rate. There is an unguaranteed residual value of $10,000 at the end of year 4. The returned equipment was worth $8,500.

On the books of Wildcat,

a. Prepare a table to amortize the Lease Payable.

b. Record the inception of the lease and first payment on January 1, 2017.

c. Record the interest payment at the end of the first year and any depreciation expense required.

d. Record the return of the equipment to Basket Leasing at the end of year 4.