* Practice Exercise 21-2 On January 2, 2017 Larkspur Company leases a machine with a fair value of $31,000 from Snead, Inc., on the following terms: 1. 2. Noncancelable term of 4 years. Rental of $7,950 per year (at beginning of each year). Estimated residual value after 4 years is $4,200. Larkspur Company guarantees the residual value of $4,200. Estimated economic life of the machine is 5 years. Larkspur Company's incremental borrowing rate is 10% a year. Snead's implicit rate is unknown. 4. What is the nature of this lease to Larkspur Company? This lease is a(n) What is the present value of the minimum lease payments? (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to o decimal places e.g. 58,971.) Present Value of Minimum Lease Payments Record the lease and first lease payment on Larkspur Company's books at the date of inception (Round answers to o decimal places, e.g. 5,125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit (To record the lease) (To record rental payment) Record the first year's depreciation on Larkspur Company's books (assume straight-line). (Round answers to o decimal places, e.g. 5,125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit Record the interest payable on Larkspur's books at December 31, 2017. (Round answers to decimal places, e.g. 5,125. Credit account titles are automatically indented is entered. Do not indent manually. If no entry is required, select "No Entry for me account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit Question Attempts: Unlimited