Based on updated 2017 rules:

E21-1B (LO2,4) (Lessee Entries; Finance Lease with No Residual Value) Sansim Corporation enters into an agreement with Truck4All, Inc. to lease a van on December 31, 2016. The following information relates to this agreement. 1. The term of the non-cancelable lease is 4 years with no renewal or bargain purchase option. The remaining economic life of the car is 4 years, and it is expected to have no residual value at the end of the lease term. 2. The fair value of the car was $45,000 at commencement of the lease. 3. Annual payments are required to be made on December 31 at the end of each year of the lease, beginning December 31, 2017. The first payment is to be of an amount of $12,267.84, with each payment increasing by a constant rate of 4% from the previous payment (i.e., the second payment will be $12,758.55 and so on). 4. Sansim's incremental borrowing rate is 6%. The rate implicit in the lease is unknown. 5. Samsim uses straight-line depreciation for all similar vehicles.

Instructions

(a) Prepare Sansim's journal entries for 2016, 2017, 2018, and 2019.

(b) Assume, instead of a constant rate of increase, the annual lease payments will increase according to the Consumer Price Index (CPI). At its current level, the CPI stipulates that the first rental payment should be $12,200. What would be the impact on the journal entries made by Samsim at commencement of the lease, as well as for subsequent years?