On January 1, 2017, Cage Company contracts to lease equipment for 5 years, agreeing to make a payment of $120,987 at the beginning of each year, starting January 1, 2017. The leased equipment is to be capitalized at $550,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Cages incremental borrowing rate is 6%, and the implicit rate in the lease is 5%, which is known by Cage. Title to the equipment transfers to Cage at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Click here to view factor tables

Prepare the journal entries that Cage 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.)

Date	Account Titles and Explanation	Debit	Credit
January 1, 2017	enter an account title To record the lease	enter a debit amount	enter a credit amount
	enter an account title To record the lease	enter a debit amount	enter a credit amount
	(To record the lease.)
	enter an account title To record lease payment	enter a debit amount	enter a credit amount
	enter an account title To record lease payment	enter a debit amount	enter a credit amount
	(To record lease payment.)

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.)

Date	Account Titles and Explanation	Debit	Credit
December 31, 2017	enter an account title To record amortization of the leased asset	enter a debit amount	enter a credit amount
	enter an account title To record amortization of the leased asset	enter a debit amount	enter a credit amount
	(To record amortization of the leased asset.)
December 31, 2017	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount

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.)

Date	Account Titles and Explanation	Debit	Credit
January 1, 2018	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount

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

CAGE COMPANY Balance Sheet (Partial) choose the accounting period

Assets

select an opening section name

enter an account title		$enter a dollar amount
Liabilities
select an opening name for section one

enter an account title		$enter a dollar amount
select an opening name for section two

enter an account title		$enter a dollar amount

How would the value of the lease liability in part (b) change if Cage 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.)

The lease liability

$enter the lease liability in dollars