B

3. Prepare the appropriate entries for both Western Soya Co. and Rhone-Metro on December 31, 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

A. Record lease.

B. Record cash payment.

On December 31, 2016, Rhone-Metro Industries leased equipment to Western Soya Co. for a four-year period ending December 31, 2020, at which time possession of the leased asset will revert back to Rhone- Metro. The equipment cost Rhone-Metro $680,516 and has an expected useful life of six years. Its normal sales price is $680,516. The lessee-guaranteed residual value at December 31, 2020, is $27,000. Equal payments under the lease are $195,000 and are due on December 31 of each year. The first payment was made on December 31, 2016. Collectibility of the remaining lease payments is reasonably assured, and Rhone-Metro has no material cost uncertainties. Western Soya's incremental borrowing rate is 13%. Western Soya knows the interest rate implicit in the lease payments is 12%. Both companies use straight- line depreciation. Use (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Show how Rhone-Metro calculated the $195,000 annual lease payments. (Enter your percentage answers as a whole number.) Guaranteed Residual Value Table or calculator function: E Present Value Amount to be recovered Amount to be recovered through periodic lease payments Lease Payments Table or calculator function: I Lease Payments Lease payments at the beginning of each of the next four years