Culver Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Larkspur Airlines for a period of 10 years. The normal selling price of the equipment is $265,292, and its unguaranteed residual value at the end of the lease term is estimated to be $20,100. Larkspur will pay annual payments of $39,500 at the beginning of each year. Culver incurred costs of $163,200 in manufacturing the equipment and $4,200 in sales commissions in closing the lease. Culver has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 11%. Larkspur Airlines has an incremental borrowing rate of 11%.

a.) Compute the amount of the initial lease liability

b.) Prepare a 10- year lease amortization schedule

c.) Prepare all of the lessee's journal entries for the first year