Question 8 Novak Corporation leased equipment to Windsor, Inc. on January 1, 2020. The lease agreement called for annual rental payments of $1,357 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $8,700, a book value of $6,700, and Novak expects a residual value of $6,200 at the end of the lease term. Novak set the lease payments with the intent of earning a 8% return, though Windsor is unaware of the rate implicit in the lease and has an incremental borrowing rate of 10%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature. Prepare all necessary journal entries for Windsor in 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 1/1/20 Right-of-Use Asset Lease Liability (To record the lease) 1/1/20 Lease Liability 1357 Cash 1357 (To record lease payment) 12/31/20v Lease Expense Right-of-Use Asset Lease Liability How would the measurement of the lease liability and right-of-use asset be affected if, as a result of the lease contract, Windsor was also required to pay $500 in commissions, prepay $750 in addition to the first rental payment, and pay $150 of insurance each year? (Round answers to 0 decimal places, e.g. 5,275.) x Lease liability X Right-of-use-asset SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Your answer is partially correct. Try again. Suppose, instead of a 3-year lease term, Windsor and Novak agree to a one-year lease with a payment of $1,357 at the start of the lease. Prepare necessary journal entry for Windsor in 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/20 Lease Liability x Cash