Larkspur Leasing Company agrees to lease machinery to Cullumber Corporation on January 1, 2017. The following information relates to the lease agreement. 1. 2. The cost of the machinery is $541,000, and the fair value of the asset on January 1, 2017, is $760,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $90,000. Cullumber depreciates all of its equipment on a straight-line basis 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2017. 5. The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor. 6. Larkspur desires a 10% rate of return on its investments. Cullumber's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years (Assume the accounting period ends on December 31.) ick Your answer is correct. Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5 Annual rental payment 133291 Compute the present value of the minimum lease payments. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Present value of minimum lease payments 740530 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Your answer is partially correct. Try again. Prepare the journal entries Cullumber would make in 2017 and 2018 related to the lease arrangement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select No Entry for the account titles and enter 0 for the amounts. Round answers to O decina places e 0-ses, Date Account Titles and Explanation Debit Credit 1/1/17 | ased Equipment 740530 Lease Liability (To record the lease.) Lease Liability 740530 133291 Cash 133291 (To record lease payment.) 12/31/17 terest Expense 66796 Interest Payable 66796 To record depreciatior 105790 Depreciation Expense Accumulated Depreciation-Equipment 105790 To record interest.) 133291 Lease Liability Interest Payable 66796 Cash 200087 59482 12/31/18 Interest Expense Interest Payable 59482 (To record depreciation.) Depreciation Expense 105790 Accumulated Depreciation- Equipment 105790 (To record interest.) Prepare the journal entries Larkspur would make in 2017 and 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,971.) Account Titles and Explanation Debit Date Credit Lease Receivable 740530 Leased Equipment 541000 Unearned Service Revenue 199530 To record the lease.) Cash 133291 Lease Receivable To record lease payment.) 12/31/17Unearned Profit on Sale-Leaseback 133291 60724 Interest Revenue 60724 1/1/18 Cash 133291 133291 Lease Receivable 53467 12/31/18Unearned Profit on Sale-Leaseback 53467 Interest Revenue