Exercise 21-12 (Part Level Submission) On January 1, 2020, Blossom Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. 2. 3. 4. 5. 6. The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $3,000, while the expected residual value at the end of the lease is $8,000. Equal rental payments are due on January 1 of each year, beginning in 2020. The fair value of the equipment on January 1, 2020, is $120,000, and its cost is $90,000. The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis. Blossom set the annual rental to ensure a 5% rate of return. Flynn's incremental borrowing rate is 6%, and the implicit rate of the lessor is unknown. Collectibility of lease payments by the lessor is probable. Both the lessor and the lessee's accounting periods end on December 31. Exercise 21-12 (Part Level Submission) Calculate the amount of the annual rental payment. (Round answer to O decimal places, e.g. 5,275.) Annual rental payment $ 22,096 Date Account Titles and Explanation Debit Credit 1/1/20 Right-of-Use Asset 108653 T Lease Liability 108653 (To record the lease) | 1/1/20 TLease Liability 2 22096 22096 22096 I Cash (To record the lease payment) 12/31/20 Tamortization Expense 18,109 T Right-of-Use Asset 18,109 (To record amortization of the right-of-use asset) 12/31/20 Interest Expense - 5433 5433 T Lease Liability 5433 5433 (To record interest expense)