On January 1, 2017, Coronado Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Coronado to make annual payments of $8,634 at the beginning of each year, starting January 1, 2017. The machine has an estimated useful life of 6 years and a $4,900 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Coronado uses the straight-line method of depreciation for all of its plant assets. Coronados incremental borrowing rate is 10%, and the lessors implicit rate is unknown.

a.Compute the present value of the minimum lease payments.

b. Prepare Journal Entries

Date Account Titles and Explanation To record the lease.) To record first payment To record depredation.) To recond Interest. To record second parament.)