On January 1, 2014, Multiplex Leasing Company leases equipment to farber Co. with 5 equal annual payments of $80,000 each, payable beginning January 1, 2014. Farber. agrees to guarantee the $50,000 residual value of the asset at the end of the lease term. Interest rate is 8% every year. Use straight line method for depreciation.

1) What is the initial value of leased asset? What journal entry would multiplex make at January 1, 2014 assuming this is a sales-type lease without selling profits?

2)How should Farber. (the lessee) record this transaction on December 31, 2014? Prepare appropriate journal entries.

3) How should Farber. (the lessee) record this transaction on January 1, 2015? Prepare appropriate journal entries.

4)What is the carrying value of the lease after the 1^st payment? After the 2^nd payment?