On January 1, 2024, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Aqua.

• The equipment cost Aqua $422,291 and has an expected economic life of five years.
• Aqua and Maywood expect the residual value at December 31, 2027, to be $59,000.
• Negotiations led to Maywood guaranteeing a $83,500 residual value.
• Equal payments under the lease are $118,000 and are due on December 31 of each year with the first payment being made on December 31, 2024.
• Maywood is aware that Aqua used a 6% interest rate when calculating lease payments.

Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Required:

1. & 2. Prepare the appropriate entries for Maywood on January 1, 2024 and December 31, 2024, related to the lease.

Record the beginning of the lease for Maywood Hydraulics. Note: Enter debits before credits. Record the amortization expense for Maywood Hydraulics. Note: Enter debits before credits. Record the lease payment and interest expense for Maywood Hydraulics. Note: Enter debits before credits