On January 1, 2017, Bramble Company contracts to lease equipment for 5 years, agreeing to make a payment of $879,904 at the beginning of each year, starting January 1, 2017. The leased equipment is to be capitalized at $4,000,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Brambles incremental borrowing rate is 6%, and the implicit rate in the lease is 5%, which is known by Bramble. Title to the equipment transfers to Bramble at the end of the lease. The asset has an estimated useful life of 5 years and no residual value.

1.Prepare the journal entries that Bramble should record on January 1, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places, e.g. 5,275.)

2.Prepare the journal entries to record amortization of the leased asset and interest expense for the year 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

3.Prepare the journal entry to record the lease payment of January 1, 2018, assuming reversing entries are not made. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places, e.g. 5,275.)

4.What amounts will appear on the lessees December 31, 2017, balance sheet relative to the lease contract?

5. How would the value of the lease liability in part (b) change if Bramble also agreed to pay the fixed annual insurance on the equipment of $2,000 at the same time as the rental payments? (Round answers to 0 decimal places, e.g. 5,275.)

What amounts will appear on the lessee's December 31, 2017, balance sheet relative to the lease contract? BRAMBLE COMPANY Balance Sheet (Partial) For the Year Ended December 31, 2017 Assets , Liabilities $