Exercise 21-20 Bridgeport Corporation leased equipment to Metlock, Inc. on January 1, 2020. The lease agreement called for annual rental payments of $851 at the beginning of each year of the 4-year lease. The equipment has an economic useful life of 8 years, a fair value of $7,400, a book value of $5,400, and Bridgeport expects a residual value of $4,900 at the end of the lease term. Bridgeport set the lease payments with the intent of earning a 4% return, though Metlock is unaware of the rate implicit in the lease and has an incremental borrowing rate of 6%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.

(a) What is the amount of the rental payments used in the lease agreement? (Round answer to 0 decimal places, e.g. 5,275.)

(b) Prepare the entries for Bridgeport for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)

(c)How would Bridgeports accounting in part a change if it incurred legal fees of $700 to execute the lease documents and $300 in advertising expenses for the year in connection with the lease? (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)