Problem I (20 pts)

Bush, Inc. leases a knowledge machine from Clinton Leasing Inc. on December 31, 2008. The following data is available concerning the lease:

1. The term of the lease is 3 years with no renewal option or bargain purchase option.

2. The annual lease payments of $72,618,82 are due on December 31 of each year beginning with December 31, 2008. Include in the above amount are $5,000 of executory costs.

3. Bushs incremental borrowing rate is 15% and Clintons is 10% which is known by the lessee. The following present value factors for 3 periods are available: 10% 15% PV of an ordinary annuity 2.48685 2.28323 PV of an annuity due 2.73554 2.62571 PV of a lump sum .75132 .65752

4. The fair value of the equipment was 200,000. The useful life of the equipment is 4 years. The salvage value of the equipment is gauranteed and is 20,000 . Equipment is depreciated under the Straight Line Method. Required

1. Prepare an amortization table for the lessee in good form

2. Prepare the all journal entries for 2008 and 2009 to record the lease, the lease payments and depreciation.