Marigold Leasing Company agrees to lease equipment to Swifty Corporation on January 1, 2020. The following information relates to the lease agreement. 1. 2. 3. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $523,000, and the fair value of the asset on January 1, 2020, is $758,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Swifty estimates that the expected residual value at the end of the lease term will be 60,000. Swifty amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. The collectibility of the lease payments is probable. Marigold desires a 10% rate of return on its investments. Swifty's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown. 4. 5. 6. (Assume the accounting period ends on December 31.) Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 58,972.) Present value of minimum lease payments $ 739176 Prepare the journal entries Swifty would make in 2020 and 2021 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 for the amounts. Round answers to 0 decimal places e.g. 58,972. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 1/1/20 Leased Equipment 739176 Lease Liability (To record the lease.) Lease Liability 135794 Cash (To record lease payment.) 12/31/20 V Amortization Expense Accumulated Depreciation-Leased Machinery (To record amortization.) Interest Expense Lease Liability (To record interest.) 1/1/21 1/1/21 (To record amortization.) Interest Expense Lease Liability (To record interest.) Prepare the journal entries Marigold would make in 2020 and 2021 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 O for the amounts. Round answers to O decimal places e.g. 58,972. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 1/1/20 Lease Receivable 758000 Cost of Goods Sold 532000 Sales Revenue 7580 Inventory 5320 To record the leace your answer is incorrect. Suppose Swifty expects the residual value at the end of the lease term to be $50,000 but still guarantees a residual of $60,000. Compute the value of the lease liability at lease commencement. Lease liability $ 744186