On January 1, 2014, Bensen Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease. 2. Equal rental payments are due on January 1 of each year, beginning in 2014. 3. The fair value of the equipment on January 1, 2014, is $228,000, and its cost is $191,520. 4. The equipment has an economic life of 8 years, with an unguaranteed residual value of $11,890. Flynn depreciates all of its equipment on a straight-line basis. 5. Bensen set the annual rental to ensure an 10% rate of return. Flynns incremental borrowing rate is 11%, and the implicit rate of the lessor is unknown. 6. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by the lessor. (Both the lessor and the lessees accounting period ends on December 31.)

Calculate the annual rental payment (show work)

Prepare all the necessary journal entries for Flynn for 2014

1/1/14 - to record the lease

- to record the lease payment

12/31/14 - to record depreciation

- to record interest

Prepare all the necessary journal entries for Bensen for 2014

1/1/14 - to record lease

- to record lease payment

12/31/14 - to record interest

TABLE 6-2 PRESENT VALUE OF 12% 92593 86957 75614 91743 79719 .77218 63552 56743 49718 63017 58349 54027 50025 .56447 .51316 48166 .50187 32197 28748 22917 42241 35218 42888 39711 31728 21494 31863 32618 23199 31524 27454 21763 19785 29189 27027 25025 23171 10687 14564 11611 17843 06110 19866 10067 07379 04017 12641 11597 08170 07361 08831 05974 04187 03738 01997 01737 01510 04849 .05731 06915 05210 04736 03194 02878 07889 .03914 06763 01894 00751 02104 01896 01708 01538 01691 01510 01348 01204 01075 05799 02674 02430 02210 00494 04971