Question 28

On January 1, 2017, Metlock Corporation signed a5-year noncancelable lease for a machine. The terms of the lease called for Metlock to make annual payments of $7,880at the beginning of each year, starting January 1, 2017. The machine has an estimated useful life of 6 years and a $5,000unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Metlock uses the straight-line method of depreciation for all of its plant assets. Metlock's incremental borrowing rate is10%, and the lessor's implicit rate is unknown.

Compute 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 0 decimal places e.g. 58,971.)

The present value of the minimum lease payments $

Prepare necessary journal entries for Metlock for this lease through January 1, 2018. (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 answers to 0 decimal places e.g. 58,971.)