On January 2, 2014, Gold Star Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $80,000 each, payable beginning January 2, 2014. Brick Co. agrees to guarantee the $50,000 residual value of the asset at the end of the lease term. Bricks incremental borrowing rate is 10%, however it knows that Gold Stars implicit interest rate is 8%. What journal entry would Brick Co. make at January 2, 2014 to record the lease?

PV Annuity Due PV Ordinary Annuity PV Single Sum

8%, 5 periods 4.31213 3.99271 .68508

10%, 5 periods 4.16986 3.79079 .62092

a. Lease Equipment 299,224

Lease Liability 299,224

b. Leased Equipment 379,224

Cash 80,000

Lease Liability 299,224

c. Leased Equipment 344,970

Cash 80,000

Lease Liability 264,970

d. Leased Equipment 353,671

Cash 80,000

Lease Liability 273,671