On January 1, 2017,RiverbedCorp. signs a 5-year noncancelable lease agreement to lease abackhoefrom Scherzer Equipment, Inc. The following information pertains to this lease agreement.

1.The agreement requires equal rental payments of $3,190beginning on January 1, 2017.2.The fair value of the backhoe on January 1, 2017, is $13,900.3.The backhoe has an estimated economic life of 6 years, with an unguaranteed residual value of $1,610.Riverbeddepreciates similar equipment on the straight-line method.4.The lease is nonrenewable. At the termination of the lease, the backhoe reverts to the lessor.5.Riverbed's incremental borrowing rate is12% per year. The lessor's implicit rate is not known byRiverbed.6.The yearly rental payment includes $490of executory costs related to insurance on the back hoe.

Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2017 and 2018.Riverbed's corporate year-end is December 31.(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. 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.)

On January 1, 2017, Riverbed Corp. signs a 5-year noncancelable lease agreement to lease a backhoe from Scherzer Equipment, Inc. The following information pertains to this lease agreement. 1. 2. 3. 9' The agreement requires equal rental payments of $3,190 beginning on January 1, 2017. The fair value of the backhoe on January 1, 2017, is $13,900. The backhoe has an estimated economic life of 6 years, with an unguaranteed residual value of $1,610. Riverbed depreciates similar equipment on the straight-line method. The lease is nonrenewable. At the termination of the lease, the backhoe reverts to the lessor. Riverbed's incremental borrowing rate is 12% per year. The lessor's implicit rate is not known by Riverbed. The yearly rental payment includes $490 of executory costs related to insurance on the back hoe. Prepare the journal entries on the lessee's books to reect the signing of the lease agreement and to record the payments and expenses related to this lease for the yea rs 2017 and 2018. Riverbed's corporate year-end is December 31. (Round present value factor calculations to 5 decimal places, e3. 1.25124 and the nal answer to 0 decimal places e3. 58,971. 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.) Date Account Titles and Explanation Debit Credit (To record the lease) (To record rental payment) Jan. 1, 2018 (To record depreciation) (To record interest) (To record depreciation) (To record interest)