1. CullumberCorporation, which uses ASPE, enters into a6-year lease of equipment on September 1, 2020, that requires6annual payments of $29,000each, beginning September 1, 2020. The equipment has a useful life of seven years. Assume that a residual value of $17,700is expected at the end of the lease, but thatCullumberdoes not guarantee the residual value. Using (1) tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the capital lease. PrepareCullumber's September 1, 2020 journal entry, assuming an interest rate of8% and that Merrill also uses ASPE.
2. SheridanCorporation, which uses ASPE, enters into a6-year lease of equipment on September 1, 2020, that requires6annual payments of $29,200each, beginning September 1, 2020. In addition,Sheridanguarantees the lessor a residual value of $17,000at lease end. The equipment has a useful life of seven years. Assume that for Moxey Corporation, the lessor, collectibility is reasonably predictable, there are no important uncertainties concerning costs, and the equipment's carrying amount is $129,000. Prepare Moxey's September 1, 2020 journal entries, assuming an interest rate of10%.