Scape Corp. manufactures telephony equipment. Scape leased equipment to User, Inc. on January 1, 2018. Scape produced the equipment at a cost of $4,400,000.

Lease description:

Quarterly rental payments $424,224 at beginning of each period

Lease term 6 years (24 quarters) No residual value; no BPO

Economic life of equipment 6 years

Implicit interest rate and lessees incremental borrowing rate 12%

Fair value of asset $7,400,000

Required: Prepare appropriate entries for both User and Scape from the beginning of the lease through the second rental payment on April 1, 2018. Depreciation and amortization are recorded at the end of each fiscal year (December 31).

USER LESEE

1. Record the lease on Jan. 01 2018

2. Record Cash Payment on Jan 01 2018

3. Record Cash Payment on April 1 2018

SCAPE LESSOR

1. Record the lease on Jan 01 2018

2. Record Cash Recieved on Jan 01 2018

3. Record cash recieved on April 1 2018

THANKS!!!!