Metlock Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $170,000. The terms of the lease are as follows:

		The lease term begins on January 1, 2019, and runs for 5 years.
		The lease requires payments of $37,396 at the beginning of each year starting January 1, 2019.
		At the end of the lease term, the equipment is to be returned to the lessor.
		Lantus implied interest rate is 5%, while Metlocks borrowing rate is 6%. Metlock uses straight-line depreciation for similar equipment. The year-end for both companies is December 31.

Assume that both companies follow ASPE. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.

Determine the present value of the minimum lease payments. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

Present Value

$Enter your answer in accordance to the question statement

Prepare Metlocks lease amortization schedule using the effective interest method. (Round answers to 0 decimal places, e.g. 5,275.)

Date		Payment		Interest		Principal		Balance
January 1, 2019								$
January 1, 2019		$		$		$
January 1, 2020
January 1, 2021
January 1, 2022
January 1, 2023
		$		$		$

Prepare the 2019 journal entries for Metlock Limited. (Credit account titles are automatically indented when the 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.)

Date	Account Titles and Explanation	Debit	Credit
2019
Jan. 1Dec. 31	Interest PayableObligations under LeaseCashInterest ExpenseMaintenance and Insurance ExpensePrepaid Maintenance and InsuranceDepreciation ExpenseAccumulated Depreciation-Leased EquipmentEquipment under Lease
	Depreciation ExpenseAccumulated Depreciation-Leased EquipmentMaintenance and Insurance ExpenseCashInterest ExpensePrepaid Maintenance and InsuranceEquipment under LeaseInterest PayableObligations under Lease
	(To record inception of lease.)
Jan. 1Dec. 31	Maintenance and Insurance ExpenseAccumulated Depreciation-Leased EquipmentCashEquipment under LeaseDepreciation ExpenseObligations under LeasePrepaid Maintenance and InsuranceInterest PayableInterest Expense
	Interest PayableObligations under LeaseDepreciation ExpenseInterest ExpenseMaintenance and Insurance ExpensePrepaid Maintenance and InsuranceCashEquipment under LeaseAccumulated Depreciation-Leased Equipment
	(To record lease payment.)
Jan. 1Dec. 31	Interest ExpenseObligations under LeasePrepaid Maintenance and InsuranceInterest PayableEquipment under LeaseCashMaintenance and Insurance ExpenseDepreciation ExpenseAccumulated Depreciation-Leased Equipment
	Interest ExpenseEquipment under LeaseDepreciation ExpenseObligations under LeaseAccumulated Depreciation-Leased EquipmentInterest PayablePrepaid Maintenance and InsuranceMaintenance and Insurance ExpenseCash
	(To record interest.)
Jan. 1Dec. 31	Interest PayableMaintenance and Insurance ExpenseDepreciation ExpenseCashObligations under LeasePrepaid Maintenance and InsuranceEquipment under LeaseAccumulated Depreciation-Leased EquipmentInterest Expense
	Accumulated Depreciation-Leased EquipmentPrepaid Maintenance and InsuranceInterest ExpenseEquipment under LeaseCashMaintenance and Insurance ExpenseObligations under LeaseInterest PayableDepreciation Expense
	(To record depreciation expense.)