Lease agreement for equipment for 5 years beginning Dec. 31, 2017. Annual rental payments of $40,000 plus $2,700 executory costs are made at the beginning of each lease year (dec. 31). Lessors impliclit rate is 9%. Lessee incremental borrowing rate is 10%. Lessee is unaware of lessor's implicit rate. At the end of the lease, lessee has the option to buy equipment for $1. Equipment has an estimated useful life of 7 yrs with no salvage value. Lessee uses straight line amortization.

Lease agreement for equipment for 5 years beginning Dec. 31, 2017. Annual rental payments of $40,000 plus $2,700 executory costs are made at the beginning of each lease year (dec. 31). Lessors impliclit rate is 9%. Lessee incremental borrowing rate is 10%. Lessee is unaware of lessor's implicit rate. At the end of the lease, lessee has the option to buy equipment for $1. Equipment has an estimated useful life of 7 yrs with no salvage value. Lessee uses straight line amortization.

Required:

1. Prepare JEs for Jan. 1 and Dec. 31, 2017 by lessee, Prepare JEs for Jan. 1 and Dec. 31, 2018 by lessee (Prepare amortization schedule for all 5 payments), Prepare JEs for Jan. 1 and Dec. 31, 2019 by lessee.

2. Prepare JEs for Jan. 1 and Dec. 31, 2017 by lessor. Prepare JEs for Jan. 1 and Dec. 31, 2018 by lessor (Prepare amortization schedule for all 5 payments), Prepare JEs for Jan. 1 and Dec. 31, 2019 by lessor.

Question

Lease agreement for equipment for 5 years beginning Dec. 31, 2017. Annual rental payments of $40,000 plus $2,700 executory costs are made at the beginning of each lease year (dec. 31). Lessors impliclit rate is 9%. Lessee incremental borrowing rate is 10%. Lessee is unaware of lessor's implicit rate. At the end of the lease, lessee has the option to buy equipment for $1. Equipment has an estimated useful life of 7 yrs with no salvage value. Lessee uses straight line amortization.

Lease agreement for equipment for 5 years beginning Dec. 31, 2017. Annual rental payments of $40,000 plus $2,700 executory costs are made at the beginning of each lease year (dec. 31). Lessors impliclit rate is 9%. Lessee incremental borrowing rate is 10%. Lessee is unaware of lessor's implicit rate. At the end of the lease, lessee has the option to buy equipment for $1. Equipment has an estimated useful life of 7 yrs with no salvage value. Lessee uses straight line amortization.

Required:

1. Prepare JEs for Jan. 1 and Dec. 31, 2017 by lessee, Prepare JEs for Jan. 1 and Dec. 31, 2018 by lessee (Prepare amortization schedule for all 5 payments), Prepare JEs for Jan. 1 and Dec. 31, 2019 by lessee.

2. Prepare JEs for Jan. 1 and Dec. 31, 2017 by lessor. Prepare JEs for Jan. 1 and Dec. 31, 2018 by lessor (Prepare amortization schedule for all 5 payments), Prepare JEs for Jan. 1 and Dec. 31, 2019 by lessor.

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Lease agreement for equipment for 5 years beginning Dec. 31, 2017. Annual rental payments of $40,000 plus $2,700 executory costs are made at the beginning

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