Adden Company signs a lease agreement dated January 1, 2019, that provides for it to lease non-specialized heavy equipment from Scott Rental Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows:

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 directly to a third party.
4.	The lease contains no renewal or bargain purchase options.
5.	Scotts 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:

2019	2020
Insurance, $1,500	Insurance, $1,300
Property taxes, $5,500	Property taxes, $6,000

Required:

2. Prepare a table summarizing the lease payments and interest expense for Adden.

Additional Instructions

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Score: 0/21

Adden Company

Summary of Lease Payments and Interest Expense

1

Date

Annual Lease Payment

Interest at 12% on Unpaid Liability

Balance of Lease Liability

2

January 1, 2019 : Before the initial payment

3

January 1, 2019

4

December 31, 2019

5

January 1, 2020

6

December 31, 2020

7

January 1, 2021

8

December 31, 2021

9

January 1, 2022

Prepare journal entries for Adden for the year 2019.

General Journal Instructions

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PAGE 1

GENERAL JOURNAL

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	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
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