3. On January 1, 2017, Pearl Corp. signs a 5-year noncancelable lease agreement to lease a backhoe from Scherzer Equipment, Inc. The following information pertains to this lease agreement: 1. The agreement requires equal rental payments of $3,340 beginning on January 1, 2017. 2. The fair value of the backhoe on January 1, 2017, is $13,200. 3. The backhoe has an estimated economic life of 6 years, with an unguaranteed residual value of $1,360. Pearl depreciates similar equipment on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the backhoe reverts to the lessor. 5. Pearls incremental borrowing rate is 13% per year. The lessors implicit rate is not known by Pearl. 6. The yearly rental payment includes $480 of executory costs related to insurance on the backhoe. Prepare the journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2017 and 2018. Pearls corporate year-end is December 31. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Jan. 1, 2017: Right-of-Use Asset Lease Liability Lease Liability Cash Dec. 31, 2017: Amortization Expense Right-of-Use Asset Interest Expense Interest Payable Jan. 1, 2018: Interest Payable Lease Liability Cash Dec. 31, 2018: Amortization Expense Right-of-Use Asset Interest Expense Interest Payable