On January 1, 2019, Yard Art leased a delivery truck from BTG. BTZ originally paid

$120,000 for the truck.

The lease agreement specified annual payments of $40,000 beginning January 1, 2019, the

inception of the lease, and at each December 31 through 2021. BTZ' interest rate for determining

payments was 11%. Yard Art's incremental borrowing rate is 12%. The estimated useful life of

the truck is 5 years with no salvage value. Both companies use straight-line depreciation.

At the end of the four-year lease term (December 31, 2022) the truck was expected to be

worth $30,000. Yard Art guaranteed a residual value of $10,000. A third party guarantor

Assurance Corporation guaranteed $10,000 and the rest was unguaranteed.

Prep the appropriate entries for both Yard Art and BTZ on December 31, 2022 (the

end of the lease term), assuming the truck is returned to the lessor and the actual residual value of the truck was $4,000 on that date.

Yard Art ( Lesser ) 12/31/2022 Depreciation Expense Accumulated Depreciation Accumulated Depreciation* Yard Art Least pavable ( Lessce ) 12/31/2022 Interest Expense Loss on residual value guarantee Leased asset Cash Inventory of equipment* BIZ ( Lessor ! Cash 12/31/2027 Loss on leased asset Lease receivable* Interest revenue