Lessee Company signs a non-cancelable 8-year lease for a piece of equipment on 1/1/2017 with Lessor Company. The lease begins on 1/1/2017 and has the following terms: 1. Equal rental payments are due on January 1 of each year, beginning in 2017. 2. The leased asset has a fair market value of $699,806 on 1/1/2017. The cost of the asset to Lessor is $535,200. 3. The lease contains a bargain purchase option for Lessee to buy the asset at the end of the lease for $65,000. 4. The leased asset has an expected economic life of 10 years with no salvage value. 5. Lessor?s implicit rate is 9%. Lessee?s incremental borrowing rate is 10%, and the lessor?s implicit rate is NOT known to the lessee. The lessee depreciates all assets using the straight-line method. 6. Lessor incurs the cost of $3,000 in negotiating and closing the lease. 7. Collectability of the lease payments is reasonably assured and no important uncertainties surrounding the amount of costs yet to be incurred by the lessor. 8. Fiscal year-end is December 31 for both Lessor and Lessee. Round to the nearest dollar. Required: 1. Calculate the amount of the annual rental payment. 2. Prepare journal entries for Lessor in 2017. 3. Prepare journal entries for Lessee in 2017. Lessee Company signs a non-cancelable 8-year lease for a piece of equipment on 1/1/2017 with Lessor Company. The lease begins on 1/1/2017 and has the following terms: 1. Equal rental payments are due on January 1 of each year, beginning in 2017. 2. The leased asset has a fair market value of $699,806 on 1/1/2017. The cost of the asset to Lessor is $535,200. 3. The lease contains a bargain purchase option for Lessee to buy the asset at the end of the lease for $65,000. 4. The leased asset has an expected economic life of 10 years with no salvage value. 5. Lessor?s implicit rate is 9%. Lessee?s incremental borrowing rate is 10%, and the lessor?s implicit rate is NOT known to the lessee. The lessee depreciates all assets using the straight-line method. 6. Lessor incurs the cost of $3,000 in negotiating and closing the lease. 7. Collectability of the lease payments is reasonably assured and no important uncertainties surrounding the amount of costs yet to be incurred by the lessor. 8. Fiscal year-end is December 31 for both Lessor and Lessee. Round to the nearest dollar. Required: 1. Calculate the amount of the annual rental payment. 2. Prepare journal entries for Lessor in 2017. 3. Prepare journal entries for Lessee in 2017