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On December 31, 2019, Teal Mountain Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Teal Mountain to

On December 31, 2019, Teal Mountain Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Teal Mountain to make annual payments of $8,634 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $4,900 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Teal Mountain uses the straight-line method of depreciation for all of its plant assets. Teal Mountains incremental borrowing rate is 12%, and the lessors implicit rate is unknown.

Please compute present value of lease payments and journal entries!

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