Problem 21-8 On January 1, 2017, Pina Company contracts to lease equipment for 5 years, agreeing to make a payment of $115,784 (including the executory costs of $7,800) at the beginning of each year, starting January 1, 2017. The taxes, the insurance, and the maintenance, estimated at $7,800 a year, are the obligations of the lessee. The leased equipment is to be capitalized at $443,000. The asset is to be depreciated on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Pina's incremental borrowing rate is 12%, and the implicit rate in the lease is 11%, which is known by Pina. Title to the equipment transfers to Pina when the lease expires. The asset has an estimated useful life of 5 years and no residual value. Click here to view factor tables Prepare the journal entry or entries that should be recorded on January 1, 2017, by Pina Company. (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 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal place e.g. 58,971.) Date Account Titles and Explanation Debit Credit January 1, 2017 (To record the lease.) (To record lease payment.) Prepare the journal entry to record depreciation of the leased asset for the year 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is reguired, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Date Debit Credit 428 December 31, 2017 LINK TO TEXT Prepare the journal entry to record the interest expense for the year 2017. (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 0 for the amounts. Round present value factor calculations to 5 decimai places, e.g. 1.25124 and the final answer to 0 decimal place e.g. 58,971.) Account Titles and Explanation Date Debit Credit December 31, 2017 Prepare the journal entry to record the lease payment of January 1, 2018, assuming reversing entries are not made. (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 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal place e.g. 58,971.) Credit Date Account Titles and Explanation Debit January 1, 2018 SHOW LIST OF ACCOUNTS What amounts will appear on the lessee's December 31, 2017, balance sheet relative to the lease contract? PINA COMPANY Balance Sheet (Partial) Assets Click if you would like to Show Work for this question: Open Show Work
