Garrison, Inc. purchased an asset for $63,282 and negotiated a non-cancelable lease with Jasper Corporation on January 1, 20X1. Jasper will lease the asset from Garrison over a 10-year lease period with annual payments beginning January 1, 20X1. The expected economic life of the asset is 12 years. Title does not transfer to the lessee, Jasper, and there is no purchase option or guaranteed residual value. Assume Garrisons implicit rate in the lease and Jaspers incremental borrowing rate are both 12%.

Required:

1. Determine the annual lease payments that Garrison will charge Jasper. Round to the nearest $.

2. What kind of lease is this for Garrison and for Jasper? Be sure to tell me what lease criteria are met and why.

3. Prepare an amortization schedule for the first two years of the lease.

4. Prepare the journal entries on January 1, 20X1, December 31, 20X1 and January 1, 20X2 and December 31, 20X2 on:

a. Garrisons books

b. Jaspers books