On January 1, 2021, Taco King leased retail space from Fogelman Properties. The 10-year finance lease requires quarterly variable lease payments equal to 2% of Taco Kings sales revenue, with a quarterly sales minimum of $470,000. Payments at the beginning of each quarter are based on previous quarter sales. During the previous 5-year period, Taco King has generated quarterly sales of over $685,000. Fogelmans interest rate, known by Taco King, was 8%. (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 journal entries for Taco King at the beginning of the lease at January 1, 2021. 2. Prepare the journal entries for Taco King at April 1, 2021. First quarter sales were $695,000. Amortization is recorded quarterly.

On January 1, 2021, Ricks Pawn Shop leased a truck from Corey Motors for a seven-year period with an option to extend the lease for three years. Ricks had no significant economic incentive as of the beginning of the lease to exercise the 3-year extension option. Annual lease payments are $11,500 due on December 31 of each year, calculated by the lessor using a 6% interest rate. The agreement is considered an operating lease. (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 Ricks journal entry to record for the right-of-use asset and lease liability at January 1, 2021. 2. Prepare the journal entries to record interest and amortization at December 31, 2021.