Assume that the following facts pertain to a non-cancelable lease agreement between Fifth-Third Leasing Company and Bob Evans Farms, a lessee.

Inception date	January 1 2014
Annual lease payment due at the beginning of each year, beginning with January 1, 2014	$81,365
Residual value of equipment at end of lease term, guaranteed by the lessee	$50,000
Lease term	6 years
Economic life of leased equipment	6 years
Fair value of asset at January 1, 2014	$400,000
Lessors implicit rate	12%
Lessees incremental borrowing rate	12%

The lessee assumes responsibility for all executory costs, which are expected to amount to $4,000 per year. The asset will revert to the lessor at the end of the lease term. The lessee has guaranteed the lessor a residual value of $50,000. The lessee uses the straight-line depreciation method for all equipment.

1) Using an Excel spreadsheet prepare an amortization schedule that would be suitable for the lessee for the lease term.

2) Prepare the journal entries for the lessee for 2014 and 2015 to record the lease agreement and all expenses related to the lease. Record them clearly and assume the lessees annual accounting period ends on December 31 and that reversing entries are used when appropriate. ***Amortization Schedule - TEMPLATE

				Bob Evans Farms - Lease Amortization Schedule
Date		Lease Payment		Interest Expense		Reduction of Lease Liability		Balance of Lease Liability
January 1 2014								$400,000
January 1 2014
January 1 2015
January 1 2015
January 1 2017
January 1 2018
January 1 2019
December 31 2019