On January 1, 2017, Sunland Company leased equipment to Flynn Corporation. The following information pertains to this lease: . 2. 3. 4. 5 The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $2,000, while the expected residual value at the end of the lease is $6,000. Equal rental payments are due on January 1 of each year, beginning in 2017. The fair value of the equipment on January 1, 2017, is $180,000, and its cost is $150,000. The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis. Sunland set the annual rental to ensure a 5% rate of return. Flynn's incremental borrowing rate is 6%, and the implicit rate of the lessor is unknown. Collectibility of lease payments by the lessor is probable. 6. Both the lessor and the lessee's accounting periods end on December 31. Date 1/1/2017 Accounst Title Lease Receivable Cost of good sold Sales Revenue 180000 $150,000 180000 Inventory $150,000 Cash $33,494 Lease Receivable $33,494 12/31/2017 Lease Receivable $7,325 Interest receivable $7,325 1/1/2017 Cash S33,494 Deposit Liability (if lease payment not probable than the entry is) $33,494 Prepare all the necessary journal entries for Flynn for 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to o decimal places, e.g. 5,275.) Account Titles and Explanation Debit Credit Date 1/1/17 (To record the lease) (To record the receipt of lease payment) 12/31/17 (To record amortization of the right-of-use asset) (To record interest expense)