1. Ragnar Company leased a machine from Lagatha Leasing Company. The lease is for 4 years. The life of the asset is 4 years. The terms of the lease require 4 payments of $100,000 at the beginning of the year, beginning on January 1, 2019. The lease is non-cancelable. Ragnars incremental borrowing rate is 8%. Lagathas earnings rate is 6%, but Ragnar does not know Lagathas rate. There is an unguaranteed residual value of $10,000 at the end of year 4. The returned equipment was worth $7,500. You will need tables from Chapter 6.

1. Prepare a table to amortize the Lease Liability for Ragnar.

Using the Lease Handout updated for changes in lease accounting, on the books of Ragnar,

2. Record the inception of the lease and first payment on January 1, 2019.

3. Record the interest accrual at the end of the first year and any amortization expense required.

4. Record the return of the equipment to Lagatha Leasing at the end of year 4 if necessary.