Buffalo Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $204,000. The terms of the lease are as follows:

		The lease term begins on January 1, 2019, and runs for 5 years.
		The lease requires payments of $44,875 at the beginning of each year starting January 1, 2019.
		At the end of the lease term, the equipment is to be returned to the lessor.
		Lantus implied interest rate is 5%, while Buffalos borrowing rate is 6%. Buffalo uses straight-line depreciation for similar equipment. The year-end for both companies is December 31.

Assume that both companies follow ASPE. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.

Determine the present value of the minimum lease payments. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

Present Value

$Enter your answer in accordance to the question statement

Prepare Buffalos lease amortization schedule using the effective interest method. (Round answers to 0 decimal places, e.g. 5,275.)

Date		Payment		Interest		Principal		Balance
January 1, 2019								$
January 1, 2019		$		$		$
January 1, 2020
January 1, 2021
January 1, 2022
January 1, 2023
		$		$		$

Prepare the 2019 journal entries for Buffalo Limited. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
2019
Jan. 1Dec. 31	Interest PayableInterest ExpenseAccumulated Depreciation-Leased EquipmentCashObligations under LeaseEquipment under LeaseMaintenance and Insurance ExpenseDepreciation ExpensePrepaid Maintenance and Insurance
	Interest ExpenseCashPrepaid Maintenance and InsuranceEquipment under LeaseInterest PayableObligations under LeaseDepreciation ExpenseMaintenance and Insurance ExpenseAccumulated Depreciation-Leased Equipment
	(To record inception of lease.)
Jan. 1Dec. 31	Depreciation ExpensePrepaid Maintenance and InsuranceObligations under LeaseMaintenance and Insurance ExpenseEquipment under LeaseCashInterest ExpenseInterest PayableAccumulated Depreciation-Leased Equipment
	Accumulated Depreciation-Leased EquipmentPrepaid Maintenance and InsuranceInterest PayableDepreciation ExpenseEquipment under LeaseMaintenance and Insurance ExpenseObligations under LeaseCashInterest Expense
	(To record lease payment.)
Jan. 1Dec. 31	Equipment under LeaseDepreciation ExpenseInterest ExpenseAccumulated Depreciation-Leased EquipmentInterest PayableObligations under LeaseCashMaintenance and Insurance ExpensePrepaid Maintenance and Insurance
	CashMaintenance and Insurance ExpenseInterest PayableAccumulated Depreciation-Leased EquipmentPrepaid Maintenance and InsuranceInterest ExpenseEquipment under LeaseDepreciation ExpenseObligations under Lease
	(To record interest.)
Jan. 1Dec. 31	CashPrepaid Maintenance and InsuranceInterest PayableMaintenance and Insurance ExpenseObligations under LeaseDepreciation ExpenseInterest ExpenseEquipment under LeaseAccumulated Depreciation-Leased Equipment
	Interest PayableEquipment under LeaseMaintenance and Insurance ExpenseObligations under LeaseCashPrepaid Maintenance and InsuranceDepreciation ExpenseInterest ExpenseAccumulated Depreciation-Leased Equipment
	(To record depreciation expense.)