Exercise 21-11 (Part Level Submission) Laura Leasing Company signs an agreement on January 1, 2017, to lease equipment to Shamrock Company. The following information relates to this agreement. 1. The term of the noncancelable lease is 5 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2017, is $85,800. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, none of which is guaranteed. 4. Shamrock Company assumes direct responsibility for all executory costs, which include the following annual amounts: (1) $870 to Rocky Mountain Insurance Company for insurance and (2) $1,450 to Laclede County for property taxes. 5. The agreement requires equal annual rental payments of $19,901.73 to the lessor, beginning on January 1, 2017. 6. The lessee's incremental borrowing rate is 12%. The lessor's implicit rate is 11% and is known to the lessee. 7. Shamrock Company uses the straight-line depreciation method for all equipment. 8. Shamrock uses reversing entries when appropriate. (a) Your answer is correct. Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and Round answers to 2 decimal places, e.g. 15.25.) SHAMROCK COMPANY (Lessee) Lease Amortization Schedule Interest on Reduction of Lease Liability Liability Lease Liability 0 81645.85 Date Annual Lease Payment 1/1/17 0 0 $ 1/1/17 19901.73 0 19901.73 1/1/18 19901.73 6791.85 61744.12 13109.88 48634.24 1/1/19 19901.73 5349.77 14551.96 34082.28 1/1/20 19901.73 3749.05 16152.68 17929.60 1/1/21 19901.73 1972.13 17928.60 AA $ 99508.65 17862.80 81645.85 Date Account Titles and Explanation Debit Credit (To record the lease.) (To record lease payment.) (To record insurance payment.) (To record property tax payment.) (To record interest.) (To record depreciation.) (To reverse interest.) (To record lease payment.) (To record insurance payment.) (To record property tax payment.) (To record interest.) (To record depreciation.)