Kingston Corporation leases equipment from Falls Company on January 1, 2017. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipments 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. Prepare Kingstons journal entries on January 1, 2017, and December 31, 2017. Assume the annual lease payment is $35,000 at the beginning of each year, and Kingstons incremental borrowing rate is 6%, which is the same as the lessors implicit rate.

Brief Exercise 21A-17 Kingston Corporation leases equipment from Falls Company on January 1, 2017. The lease agreement does not transder ownership, contain abargainpurchue option and is not adnt it covers ea of tnts -ya useful life, and the present value of the leasepam ers is lessthan 90%of the tare same as the lessor's implicit rate. alu e of the asset leased. Theannual lease payment a 135000 at the begr s h vw rdom s eo, ed tos Prepare all the necessary journal entries for Falls Company (the lessor) for 2017, assuming the equipment is carmried at a cost of $200,000.(Credit account tiales ane astonabialy manually) Date Account Titles and Explanation Debit Credit 2/31/17 (To record the recognition of the revenue each period) 12/31/17 (To record depreciation expense on the leased equipment) life, and the present value of the lease payments is less than 90%ofthe fair value of the asset leased as the lessor's implicit rate re all the necessary journal entries for Falls Company (the lessor) for 2017, assuming the equipment is ally.) te Account Titles and Explanation l/1Cash Debit Credit 35000 Unearned Lease Revenue 35000 31/17 Unearned Lease Revenue 35000 Lease Revenue 35000 (To record the recognition of the revenue each period) 31/17 Depreciation Expense Accumulated Depreciation-Equipment (To record depreciation expense on the leased equipment)