Bonita Manufacturing Ltd. has signed a lease agreement with LPN Leasing Inc. to lease some specialized manufacturing equipment. The terms of the lease are as follows:

?The lease is for 5 years commencing January 1, 2017.

?Bonita must pay LPN $64,853 on January 1 of each year, beginning in 2017. This amount includes an annual charge of $4,000 for maintenance and insurance on the equipment.

?Equipment of this type normally has an economic life of 9 years.

?LPN has concluded, based on its review of Bonita's financial statements, that there is no unusual credit risk in this situation. LPN will not incur any further costs with regard to this lease.

?LPN purchases this equipment directly from the manufacturer at a cost of $222,200, and normally sells the equipment for $270,000.

?Bonita's borrowing rate is 10%. LPN's implied interest rate is 9%, which is known to Bonita at the time of negotiating the lease.

?Bonita uses the straight-line method to depreciate similar equipment.

?Both Bonita and LPN have calendar fiscal years (year end December 31), and follow ASPE.

Prepare the journal entries on LPN Leasing's books on January 1, 2017. 

DATEACCOUNT Titles and ExplanationHEbitCreditJan . 1, 2017[ To record inception of lease & cost of goods sold)| TO record the receipt of lease payment !