Problem 21A-6 b-f Splish Leasing Company agrees to lease equipment to Blossom Corporation on January 1, 2017. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $502,000, and the fair value of the asset on January 1, 2017, is $739,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $102,000. Blossom estimates that the expected residual value at the end of the lease term will be 102,000. Blossom amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2017. 5. The collectibility of the lease payments is probable. 6. Splish desires a 11% rate of return on its investments. Blossom's incremental borrowing rate is 12%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Annual rental payment Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Present value of minimum lease payments SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Prepare the journal entries Blossom would make in 2017 and 2018 related to the lease arrangement. (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. Round answers to O decimal places e.g. 58,972.) Date Account Titles and Explanation Debit Credit 1/1/17 Leased Equipment Lease Liability (To record the lease.) Lease Liability Cash (To record lease payment.) 12/31/17 9 Depreciation Expense 12/31/17 9 Depreciation Expense Accumulated Depreciation-Capital Leases (To record amortization.) Interest Expense Interest Payable (To record interest.) Lease Liability 1/1/18 Interest Payable 12/31/18 Depreciation Expense Accumulated Depreciation-Building (To record amortization.) Interest Expense Interest Payable (To record interest.) LCUSCICCIVUDIC ( 12/31/18 ^ Interest Receivable Interest Revenue SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Suppose Blossom expects the residual value at the end of the lease term to be $92,000 but still guarantees a residual of $102,000. Compute the value of the lease liability at lease commencement. Lease liability $ Click if you would like to Show Work for this question: Open Show Work