On January 1, 2017, a machine was purchased for $800,000 by Marin Co. The machine is expected to have an 8-year life with no salvage value. It is to be depreciated on a straight-line basis. The machine was leased to Cullumber Inc. for 3 years on January 1, 2017, with annual rent payments of $275,000 due at the beginning of each year, starting January 1 2017. The machine is expected to have a residual value at the end of the lease term of $562,500, though this amount is unguaranteed For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your answer is correct. How much should Marin report as income before income tax on this lease for 2017? Income before income tax 175000 (b) Your answer is correct. Record the journal entries Cullumber would record for 2017 on this lease, assuming its incremental borrowing rate is 5% and the rate implicit in the lease is unknown. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/17Right-of-Use Asset 786338 Lease Liability 786338 (To record the lease) 1/1/17 Lease Liability 275000 Cash 275000 (To record lease liability) 12/31/17 Lease Expense 275000 Lease Liability 25567 Right-of-Use Asset 249433 Suppose the lease was only for one year (only one payment of the same amount at commencement of the lease), with a renewal option at market rates at the end of the lease, and Cullumber elects to use the short-term lease exception. Record the journal entry Cullumber would record for 2017 on this lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Accounts Payable Accumulated Depreciation-Building Accumulated Depreciation-Leased Building Accumulated Depreciation-Capital Leases Accumulated Depreciation-Equipment Accumulated Depreciation-Leased Equipment Accumulated Depreciation-Leased Machinery Accumulated Depreciation-Machinery Advertising Expense Amortization Expense Airplanes Buildings Cash Cost of Goods Sold Deferred Gross Profit Deposit Liability Depreciation Expense Equipment Executory Costs Executory Costs Payable Gain on Disposal of Equipment Gain on Disposal of Plant Assets Gain on Lease Insurance Expense Interest Expense Interest Payable Interest Receivable Interest Revenue Inventory Land Leased Asset Leased Buildings Leased Equipment Lease Expense Leased Land Lease Liability Lease Receivable Lease Revenue Legal Expense Loss on Capital Lease Machinery Maintenance and Repairs Expense Notes Payable Prepaid Lease Executory Costs Prepaid Legal Fees Property Tax Expense Property Tax Payable Rent Expense Rent Payable Rent Receivable Rent Revenue Revenue from Sale-Leaseback Right-of-Use Asset Salaries and Wages Expense Sales Revenue Selling Expenses Trucks Unearned Profit on Sale-Leaseback Unearned Lease Revenue Unearned Service Revenue