Pronghorn Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $204,000. The terms of the lease are as follows:

		The lease term begins on January 1, 2019, and runs for 5 years.
		The lease requires payments of $44,875 at the beginning of each year starting January 1, 2019.
		At the end of the lease term, the equipment is to be returned to the lessor.
		Lantus implied interest rate is 5%, while Pronghorns borrowing rate is 6%. Pronghorn uses straight-line depreciation for similar equipment. The year-end for both companies is December 31.

Assume that both companies follow ASPE. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.

Determine the present value of the minimum lease payments. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

Present Value

$Enter your answer in accordance to the question statement

Prepare Pronghorns lease amortization schedule using the effective interest method. (Round answers to 0 decimal places, e.g. 5,275.)

Date		Payment		Interest		Principal		Balance
January 1, 2019								$
January 1, 2019		$		$		$
January 1, 2020
January 1, 2021
January 1, 2022
January 1, 2023
		$		$		$

Prepare the 2019 journal entries for Pronghorn Limited. (Credit account titles are automatically indented when the 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.)

Date	Account Titles and Explanation	Debit	Credit
2019
Jan. 1Dec. 31	Interest ExpenseCashObligations under LeasePrepaid Maintenance and InsuranceAccumulated Depreciation-Leased EquipmentMaintenance and Insurance ExpenseDepreciation ExpenseInterest PayableEquipment under Lease
	Accumulated Depreciation-Leased EquipmentMaintenance and Insurance ExpenseInterest ExpensePrepaid Maintenance and InsuranceDepreciation ExpenseCashInterest PayableEquipment under LeaseObligations under Lease
	(To record inception of lease.)
Jan. 1Dec. 31	Depreciation ExpenseAccumulated Depreciation-Leased EquipmentMaintenance and Insurance ExpensePrepaid Maintenance and InsuranceCashEquipment under LeaseObligations under LeaseInterest ExpenseInterest Payable
	Obligations under LeaseInterest PayableMaintenance and Insurance ExpenseInterest ExpenseCashDepreciation ExpensePrepaid Maintenance and InsuranceEquipment under LeaseAccumulated Depreciation-Leased Equipment
	(To record lease payment.)
Jan. 1Dec. 31	Depreciation ExpenseAccumulated Depreciation-Leased EquipmentInterest ExpenseInterest PayablePrepaid Maintenance and InsuranceObligations under LeaseEquipment under LeaseCashMaintenance and Insurance Expense
	Prepaid Maintenance and InsuranceInterest ExpenseDepreciation ExpenseAccumulated Depreciation-Leased EquipmentEquipment under LeaseCashObligations under LeaseMaintenance and Insurance ExpenseInterest Payable
	(To record interest.)
Jan. 1Dec. 31	CashDepreciation ExpensePrepaid Maintenance and InsuranceInterest ExpenseInterest PayableAccumulated Depreciation-Leased EquipmentMaintenance and Insurance ExpenseObligations under LeaseEquipment under Lease
	Interest PayableObligations under LeaseDepreciation ExpensePrepaid Maintenance and InsuranceMaintenance and Insurance ExpenseAccumulated Depreciation-Leased EquipmentEquipment under LeaseCashInterest Expense
	(To record depreciation expense.)