B PROBLEMS P21-2B (LO2,4) (Lessee Entries and Balance Sheet Presentation, Finance Lease) On January 1, 2017, Hector Construction Company contracts to lease equipment for 4 years, agreeing to make a payment of $102,096 at the beginning of each year starting January 1, 2017. The leased equipment is to be capitalized at $375,000. The asset is to be amortized on a double- declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Hector's incremental borrowing rate is 8%, and the implict rate in the lease is 6%, which is known by Hector. Title to the equipment transfers to Hector at the end of the lease. The asset has an estimated useful life of 4 years and no residual value. Instructions (Round all numbers to the nearest dollar.) (a) Explain the probable relationship of the $375,000 amount to the lease arrangement. (b) Prepare the journal entry or entries that Hector should record on January 1, 2017 (c) Prepare the journal entries to record amortization of the leased asset and interest expense for the year 2017 (d) Prepare the journal entry to record the lease payment of January 1, 2018, assuming reversing entries are not made (e) What amounts will appear on the lessee's December 31, 2017, balance sheet relative to the lease contract? (f) How would the value of the lease liability in part (b) change if Hector also agreed to pay the fixed annual insurance on the equipment of $1,600 at the same time as the rental payments