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Exercise 21A-13 b Phelps Company leases a building to Walsh, Inc. on January 1, 2017. The following facts pertain to the lease agreement. 1. The lease term is 5 years, with equal annual rental payments of $4,703 at the beginning of each year. 2. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. 3. The building has a fair value of $23,000, a book value to Phelps of $16,000, and a useful life of 6 years. 4. At the end of the lease term, Phelps and Walsh expect there to be an unguaranteed residual value of $4,000. 5. Phelps wants to earn a return of 8% on the lease, and collectibility of the payments is probable. This rate is known by Walsh. Click here to view the factor table. (b) Using the original facts of the lease, show the journal entries to be made by both Phelps and Walsh in 2017. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Phelps Journal Entries Account Titles and Explanation Debit Credit Date 1/1/17 (To record the lease) (To record lease payment) 12/31/17 Walsh's Journal Entries Debit Credit Date Account Titles and Explanation 1/1/17 (To record the lease) (To record lease liability) 12/31/17 (To record interest expense) (To record amortization of the right-of-use asset)