Exercise 21B-8 The following facts pertain to a noncancelable lease agreement between Buffalo Leasing Company and Carla Company, a lessee Inception date Annual lease payment due at the beginning of May 1, 2017 each year, beginning with May 1, 2017 Bargain-purchase option price at end of lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at May 1, 2017 Lessor's implicit rate Lessee's incremental borrowing rate $21,144.66 $3,800 5 years 10 years $68,000 $89,000 11% 11% The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs. The expected residual value of the equipment at the end of 5 (10) years is $12,000 ($0) Click h Prepare a lease amortization schedule for Carla Company for the 5-year lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25126 and Round answers to 2 decimal places, e.g. 15.25.) CARLA COMPANY (Lessee) Lease Amortization Schedule Annual Lease Payment Plus BPO Interest on Liability Reduction of Lease Liability Date Lease Liability 89,000 67,855 54,175 38,989 22,133 3,424 21,145 21,145 21,145 21,145 21,145 3,800 109,523 21,145 13,681 15,185 16,856 18,710 3,423 89,000 7,464 5,959 4,289 2,435 377 5/1/20 5/1/21 4/30/22 0 20,523 Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2017 and 2018. Carla's annual accounting period ends on December 31. Reversing entries are used by Carla. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and Round answers to 2 decimal places, e.g. 15.25.) Debit Credit Date Account Titles and Explanation 5/1/17 Leased Equipment Lease Liability (To record the lease.) 89,000 89,000 Lease Liability 21,145 Cash 21,145 (To record the first lease payment.) | 12/31/17 Interest Expense 7464 Interest Payable 7464 To To record interest.) Depreciation Expense 14833 14833 Accumulated Depreciation-Equipment To record depreciation.) 1/1/18 Interest Payable 21,145 Interest Expense 21,145 Lease Liability 13,681 7,464 Interest Expense 21145 Cash 12/31/18 Interest Expense Interest Payable To record interest.) Depreciation Expense Accumulated Depreciation-Equipment (To record depreciation.)