Carla 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 $185,000. 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 $42,168 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 7%, while Carlas borrowing rate is 8%. Carla uses straight-line depreciation for similar equipment. The year-end for both companies is December 31.

Assume that both companies follow ASPE.

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 Carlas 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 Carla 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	Depreciation ExpenseObligations under LeaseInterest ExpenseCashMaintenance and Insurance ExpensePrepaid Maintenance and InsuranceAccumulated Depreciation-Leased EquipmentEquipment under LeaseInterest Payable
	Prepaid Maintenance and InsuranceAccumulated Depreciation-Leased EquipmentDepreciation ExpenseMaintenance and Insurance ExpenseInterest ExpenseCashEquipment under LeaseObligations under LeaseInterest Payable
	(To record inception of lease.)
Jan. 1Dec. 31	Prepaid Maintenance and InsuranceMaintenance and Insurance ExpenseObligations under LeaseEquipment under LeaseInterest PayableDepreciation ExpenseCashInterest ExpenseAccumulated Depreciation-Leased Equipment
	Equipment under LeaseMaintenance and Insurance ExpenseAccumulated Depreciation-Leased EquipmentObligations under LeaseCashPrepaid Maintenance and InsuranceDepreciation ExpenseInterest ExpenseInterest Payable
	(To record lease payment.)
Jan. 1Dec. 31	Accumulated Depreciation-Leased EquipmentMaintenance and Insurance ExpenseInterest ExpenseInterest PayableDepreciation ExpensePrepaid Maintenance and InsuranceCashObligations under LeaseEquipment under Lease
	CashInterest PayablePrepaid Maintenance and InsuranceDepreciation ExpenseEquipment under LeaseInterest ExpenseObligations under LeaseAccumulated Depreciation-Leased EquipmentMaintenance and Insurance Expense
	(To record interest.)
Jan. 1Dec. 31	Equipment under LeaseObligations under LeasePrepaid Maintenance and InsuranceAccumulated Depreciation-Leased EquipmentDepreciation ExpenseInterest ExpenseMaintenance and Insurance ExpenseInterest PayableCash
	CashInterest PayablePrepaid Maintenance and InsuranceEquipment under LeaseDepreciation ExpenseInterest ExpenseAccumulated Depreciation-Leased EquipmentMaintenance and Insurance ExpenseObligations under Lease