Indiana Jones Corporation enters into a 6-year lease of equipment on January 1, 2018, which requires 6 annual payments of $30,000 each, beginning January 1, 2018. In addition, Indiana Jones guarantees the lessor a residual value of $20,000 at lease-end. The equipment has a useful life of 6 years.

A. Prepare Indiana Jones (lessee) January 1, 2018, journal entries assuming an interest rate of 10%.

B. Prepare Indiana Jones (Lessee) January 1, 2018, journal entries assuming an interest rate of 10% and that the residual value was not guaranteed.