glaus leasing company agrees to lease equipment to Jensen corporation on January 1,2017. the following information related to the lease agreement. 1. the term of the lease is 7 years with no renewal option,and the machinery has an estimated economic life of 9 years. 2. the cost of machinery is 525,000 and the fair market value of the asset on January 1,2017, is 700000. 3. at the end of the lease term,the asset reverts to the lessor and has a guaranteed residual value of 50000. Jensen estimates that the expected residual value at the end of the lease term will be 50000. Jensen amortzes all of its leases equipment on a straight line basis. 4. the lease agreement requires equal annual rental payments,beginning January 1,2017. 5. the collectibility of the lease payments is probable. 6.glaus desires a 5% rate of return on it's investment. Jensen's incremental borrowing rate is 6%, and the lessors implicit rate is unknown.

instructions a discuss the nature of this lease for both the lessee and lessor. b. calculate the amount of annual rental payment required c. compute the value of the lease liability to the lessee. d. prepare the journal entries Jensen would make in 2017 and 2018 related to the lease arrangement. e. prepare the journal entries glaus would make in 2017 and 2018 related to the lease agreement f. suppose Jensen expects the residual value at the end of the lease term to be 40,000 but still guarantees a residual value of 50,000. compute the value of the lease liability at lease commencement.