On January 1, 2017, Vaughn Corporation signed a5-year noncancelable lease for a machine. The terms of the lease called for Vaughn to make annual payments of $8,148at the beginning of each year, starting January 1, 2017. The machine has an estimated useful life of 6 years and a $5,500unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Vaughn uses the straight-line method of depreciation for all of its plant assets. Vaughn's incremental borrowing rate is11%, and the lessor's implicit rate is unknown.

Compute the present value of the minimum lease payments

The present value of the minimum lease payments $

Prepare necessary journal entries for Vaughn for this lease through January 1, 2018.

Exercise 21-1 On January 1, 2017, Vaughn Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Vaughn to make annual payments of $8,148 at the beginning of each year, starting January 1, 2017. The machine has an estimated useful life of 6 years and a $5,500 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Vaughn uses the straight-line method of depreciation for all of its plant assets. Vaughn's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown. Click here to view factor tables Compute the present value of the minimum lease payments. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) $ The present value of the minimum lease payments Prepare all necessary journal entries for Vaughn for this lease through January 1, 2018. (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. 58,971.) Date Account Titles and Explanation (To record the lease.) (To record first payment.) (To record depreciation.) (To record interest.) 1/1/18 Debit Credit (To record second payament.)