On January 1, Year 1, lessor leases equipment to lessee. Data on the lease: Equipment fair value and lessor's book value, $25,771 (asset is new) Lessor's implicit rate and lessee's implicit borrowing rate, 8% Lease payments due each December 31 through Year 3 (three-year lease term) Useful life of equipment, three years (no residual value) Payments are due at the end of the year (ordinary annuity).

1. Lessor's Calculation of Lease Payments with No Residual Value

2. Lessee's Calculation of Present Value of Minimum Lease Payments

3. Lessee Amortization Schedule of the Lease Liability.

4. Journal Entry: Lessee Inception and Year 1 Interest and Amortization

5. Journal Entry: Lessee Years 2 and 3 Interest and Amortization