Sandhill Leasing leases a new machine to Sharrer SA. The machine has a cost of 70,000 and fair value of 72,000. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2022. Sandhill expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2022.

a) Prepare the journal entry at commencement of the lease for Sandhill. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
1/1/22	enter an account title for the journal entry on January 1, 2022	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1, 2022	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1, 2022	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1, 2022	enter a debit amount	enter a credit amount

b)

Prepare the journal entry at commencement of the lease for Sharrer. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
1/1/22	enter an account title for the journal entry on January 1, 2022	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1, 2022	enter a debit amount	enter a credit amount

c)

Prepare the journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not know Sandhills implicit rate (Sharrers incremental borrowing rate is 9%), and (2) Sharrer incurs initial directs costs of 10,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
1/1/22	enter an account title for the journal entry on January 1, 2022	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1, 2022	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1, 2022	enter a debit amount	enter a credit amount