Marin Industries and Headland Inc. enter into an agreement that requires Headland Inc. to build three diesel-electric engines to Marins specifications. Upon completion of the engines, Marin has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2017, and requires annual rental payments of $356,974 each January 1, starting January 1, 2017. Marins incremental borrowing rate is 8%. The implicit interest rate used by Headland and known to Marin is 6%. The total cost of building the three engines is $2,360,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Marin depreciates similar equipment on a straight-line basis. At the end of the lease, Marin assumes title to the engines. Collectibility of the lease payments is probable.

(b) Prepare the journal entry to record the transaction on January 1, 2017, on the books of Marin (the lessee). (C manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. answer to O decimal places e.g. 58,971 Account Titles and Explanation Debit Credit Right-of-Use Asset 2785000 Lease Liability 2785000 (b) Prepare the journal entry to record the transaction on January 1, 2017, on the books of Marin (the lessee). (C manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. answer to O decimal places e.g. 58,971 Account Titles and Explanation Debit Credit Right-of-Use Asset 2785000 Lease Liability 2785000