Shamrock Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $204,000. The terms of the lease are as follows:

		The lease term begins on January 1, 2019, and runs for 5 years.
		The lease requires payments of $44,875 at the beginning of each year starting January 1, 2019.
		At the end of the lease term, the equipment is to be returned to the lessor.
		Lantus implied interest rate is 5%, while Shamrocks borrowing rate is 6%. Shamrock uses straight-line depreciation for similar equipment. The year-end for both companies is December 31.

Assume that both companies follow ASPE. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.

Determine the present value of the minimum lease payments. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

Present Value

$Enter your answer in accordance to the question statement

Prepare Shamrocks lease amortization schedule using the effective interest method. (Round answers to 0 decimal places, e.g. 5,275.)

Date		Payment		Interest		Principal		Balance
January 1, 2019								$
January 1, 2019		$		$		$
January 1, 2020
January 1, 2021
January 1, 2022
January 1, 2023
		$		$		$

Prepare the 2019 journal entries for Shamrock Limited. (Credit account titles are automatically indented when the 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.)

Date	Account Titles and Explanation	Debit	Credit
2019
Jan. 1Dec. 31	Prepaid Maintenance and InsuranceObligations under LeaseAccumulated Depreciation-Leased EquipmentDepreciation ExpenseCashEquipment under LeaseInterest ExpenseInterest PayableMaintenance and Insurance Expense
	Obligations under LeaseDepreciation ExpenseMaintenance and Insurance ExpenseCashInterest ExpenseInterest PayableEquipment under LeaseAccumulated Depreciation-Leased EquipmentPrepaid Maintenance and Insurance
	(To record inception of lease.)
Jan. 1Dec. 31	Obligations under LeaseInterest ExpenseInterest PayableDepreciation ExpensePrepaid Maintenance and InsuranceMaintenance and Insurance ExpenseEquipment under LeaseAccumulated Depreciation-Leased EquipmentCash
	Interest ExpenseMaintenance and Insurance ExpenseObligations under LeaseAccumulated Depreciation-Leased EquipmentPrepaid Maintenance and InsuranceEquipment under LeaseInterest PayableCashDepreciation Expense
	(To record lease payment.)
Jan. 1Dec. 31	Interest PayablePrepaid Maintenance and InsuranceObligations under LeaseCashAccumulated Depreciation-Leased EquipmentDepreciation ExpenseMaintenance and Insurance ExpenseEquipment under LeaseInterest Expense
	Obligations under LeaseInterest PayableDepreciation ExpenseAccumulated Depreciation-Leased EquipmentEquipment under LeaseCashPrepaid Maintenance and InsuranceMaintenance and Insurance ExpenseInterest Expense
	(To record interest.)
Jan. 1Dec. 31	Prepaid Maintenance and InsuranceInterest ExpenseAccumulated Depreciation-Leased EquipmentObligations under LeaseInterest PayableMaintenance and Insurance ExpenseEquipment under LeaseCashDepreciation Expense
	Prepaid Maintenance and InsuranceEquipment under LeaseObligations under LeaseCashDepreciation ExpenseInterest PayableInterest ExpenseAccumulated Depreciation-Leased EquipmentMaintenance and Insurance Expense
	(To record depreciation expense.)