Multiple Choice Question 87

On January 2, 2018, Blossom Leasing Company leases equipment toBrick Co. with 5 equal annual payments of $158000 each, payablebeginning January 2, 2018. Brick Co. agrees to guarantee the $98000residual value of the asset at the end of the lease term. Brick’sincremental borrowing rate is 10%, however it knows that Blossom’simplicit interest rate is 8%. What journal entry would Brick Co.make at January 1, 2019 to record the second leasepayment?

	PV Annuity Due	PV Ordinary Annuity	PV Single Sum
8%, 5 periods	4.31213	3.99271	0.68058
10%, 5 periods	4.16987	3.79079	0.62092

Lease Liability	111267
Interest Payable	46733
Cash		158000

Lease Liability	110799
Interest Payable	47201
Cash		158000

Lease Liability	158000
Cash		158000

Lease Liability	98999
Interest Payable	59001
Cash		158000