Ch. 21 In-Class Practice Problem Practice Problem 1: Exercise 21-8 (Lessee Entries with Bargain-Purchase Option) The following facts pertain to a noncancelable lease agreement between Ivanhoc Lcasing Company and Shamrock Company, a lessee. Inception date: Annual lease payment due at the beginning of May 1, 2017 each year, beginning with May 1, 2017 Bargain-purchase option price at end of lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at May 1, 2017 Lessor's implicit rate Lessee's incremental borrowing rate $21,197.82 $4,200 5 years 10 years $71,000 $91,000 10% 10% The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs. The expected residual value of the equipment at the end of 5 (10) years is $12,000 (S0). Required: (a) Prepare a lease amortization schedule for Shamrock Company for the S-year lease term. SHAMROCK COMPANY (Lessee) Schedule Payment Plus BPO Interest on Reduction of Lease 5/1/20 5/1/21 4/30/22 (b) Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2017 and 2018. Shamrock's annual accounting period ends on December 31. Reversing entries are used by Shamrock