On January 1, 2014, Burke Corporation signed a 6-year noncancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $9,422 at the beginning of each year, starting January 1, 2014. The machine has an estimated useful life of 7 years and a $5,220 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Burke uses the straight-line method of depreciation for all of its plant assets. Burkes incremental borrowing rate is 8%, and the lessors implicit rate is unknown.

Compute the present value of the minimum lease payments. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)

The present value of the minimum lease payments $

Prepare all necessary journal entries for Burke for this lease through January 1, 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 58,971.)

Date Account Titles and Explanation Debit Credit 1/1/14 (To record the lease.) (To record first payment.) 12/31/14 (To record depreciation.) (To record interest.) 1/1/15 (To record second payament.)