Indigo Corporation leased equipment to Teal Mountain, Inc. on January 1, 2017. The lease agreement called for annual rental payments of $1,290 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $9,700, a book value of $7,700, and Indigo expects a residual value of $7,200 at the end of the lease term. Indigo set the lease payments with the intent of earning a 6% return, though Teal Mountain is unaware of the rate implicit in the lease and has an incremental borrowing rate of 8%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.

(b) Prepare all necessary journal entries for Teal Mountain in 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)

(c) How would the measurement of the lease liability and right-of-use asset be affected if, as a result of the lease contract, Teal Mountain was also required to pay $600 in commissions, prepay $700 in addition to the first rental payment, and pay $150 of insurance each year? (Round answers to 0 decimal places, e.g. 5,275.)

(d) Suppose, instead of a 3-year lease term, Teal Mountain and Indigo agree to a one-year lease with a payment of $1,290 at the start of the lease. Prepare necessary journal entry for Teal Mountain in 2017.