Erica Corp leases machinery on January 1, 2012, and records this as a capital (finance) lease. Seven annual lease payments of $140,000 are required the end of each year, starting December 31, 2012.The present value of the lease payments at 10% is $681,600.

Erica uses the effective interest method of amortization for the lease.For all machinery, the company uses straight-line depreciation over eight years, with no residual value.

Required (Round to the nearest dollar.)

(a)Prepare a lease amortization table for 2012 and 2013.

(b)Prepare the general journal entries relating to this lease for 2012.

(a)

(b)