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On January 1, 2017, Sheffield Company contracts to lease equipment for 5 years, agreeing to make a payment of $109,913 at the beginning of each

On January 1, 2017, Sheffield Company contracts to lease equipment for 5 years, agreeing to make a payment of $109,913 at the beginning of each year, starting January 1, 2017. The leased equipment is to be capitalized at $466,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Sheffields incremental borrowing rate is 6%, and the implicit rate in the lease is 9%, which is known by Sheffield. Title to the equipment transfers to Sheffield at the end of the lease. The asset has an estimated useful life of 5 years and no residual value.

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How would the value of the lease liability in part (b) change if Sheffield 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.) Please give an amount?

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[ Your answer is correct. Prepare the journal entries that Sheffield should record on January 1, 2017. (Credit account titles are required, select "No Entry" for the account titles and enter O for the amounts. Round present decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit January 1, 2017 Right-of-Use Asset 466000 Lease Liability To record the lease.) Lease Liability 466000 109913 Cash 109913 (To record lease payment.) The lease liability 109913

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