On January 1, 2021, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2024, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $884,703 and has an expected economic life of five years. Nevels expects the residual value at December 31, 2024, will be $116,000. Negotiations led to the lessee guaranteeing a $172,000 residual value. Equal payments under the lease are $216,000 and are due on December 31 of each year with the first payment being made on December 31, 2021. Nguyen is aware that Nevels used a 6% interest rate when calculating lease payments. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:

1. Prepare the appropriate entries for both Nguyen and Nevels on January 1, 2021, to record the lease. 2. Prepare all appropriate entries for both Nguyen and Nevels on December 31, 2021, related to the lease.

Journal entry worksheet

• Record the beginning of the lease for Nguyen.
• Record the beginning of the lease for Nevels.

Date	General Journal	Debit	Credit
January 01, 2021

• Record the lease payment for Nguyen.
• Record the amortization expense for Nguyen.
• Record the lease payment received by Nevels.

Note: Enter debits before credits

Date	General Journal	Debit	Credit
December 31, 2021