Sheffield Leasing Company agrees to lease machinery to Tamarisk Corporation on January 1, 2017. The following information relates to the lease agreement.

1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.

2. The cost of the machinery is $483,000, and the fair value of the asset on January 1, 2017, is $757,000.

3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $102,000. Tamarisk estimates that the expected residual value at the end of the lease term will be 102,000. Tamarisk amortizes all of its leased equipment on a straight-line basis.

4. The lease agreement requires equal annual rental payments, beginning on January 1, 2017.

5. The collectibility of the lease payments is probable.

6. Sheffield desires a 10% rate of return on its investments. Tamarisks incremental borrowing rate is 11%, and the lessors implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables Correct answer. Your answer is correct. Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Annual rental payment $ Entry field with correct answer SHOW LIST OF ACCOUNTS SHOW SOLUTION SHOW ANSWER LINK TO TEXT LINK TO TEXT Incorrect answer. Your answer is incorrect. Try again. Compute the present value of the minimum lease payments. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Present value of minimum lease payments $ Entry field with incorrect answer SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Partially correct answer. Your answer is partially correct. Try again. Prepare the journal entries Tamarisk would make in 2017 and 2018 related to the lease arrangement. (Credit account titles are automatically indented when 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. Round answers to 0 decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit Entry field with correct answer 1/1/1712/31/171/1/1812/31/18 Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer (To record the lease.) Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer (To record lease payment.) Entry field with incorrect answer 1/1/1712/31/171/1/1812/31/18 Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with incorrect answer Entry field with correct answer Entry field with correct answer (To record depreciation.) Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer (To record interest.) 1/1/18 Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with correct answer Entry field with incorrect answer 1/1/1712/31/171/1/1812/31/18 Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer (To record depreciation.) Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer (To record interest.) SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Incorrect answer. Your answer is incorrect. Try again. Prepare the journal entries Sheffield would make in 2017 and 2018. (Credit account titles are automatically indented when 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. Round answers to 0 decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit 1/1/17 Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer (To record the lease.) Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer (To record lease payment.) Entry field with incorrect answer 1/1/1712/31/171/1/1812/31/18 Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer 1/1/1712/31/171/1/1812/31/18 Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer 1/1/1712/31/171/1/1812/31/18 Entry field with incorrect answer Entry field with incorrect answer now contains modified data Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer