Sheridan Ltd., which uses ASPE, recently expanded its operations into an adjoining municipality, and on March 30, 2020, it signed a 15-year lease with its Municipal Industrial Commission (MIC). The property has a total fair value of $570,000 on March 30, 2020, with one third of the amount attributable to the land and two thirds to the building. The land is expected to double in value over the next 15 years, while the building will depreciate by 60%. The lease includes a purchase option at the end of the lease that allows Sheridan to receive title to the property for a payment of $269,400, which is considered a BPO. Sheridan is required to make rental payments of $24,600 annually, with the first payment due March 30, 2020. The MICs implicit interest rate, known to all, is 7%. The buildings economic life is estimated at 25 years, at which time it will have a small residual value of $40,000.

QUESTIONS:

A) Using time value of money tables, a financial calculator, or Excel functions, calculate the PV of the lease obligation.

Present value of the lease obligation

$Enter your answer in accordance to the question statement

B) Prepare the entry required by Sheridan on the signing of the lease and the payment of the first lease payment.

Date	Account Titles and Explanation	Debit	Credit
Mar. 30, 2020
	(To record inception of lease.)

C) Assuming that Sheridans year end is December 31, prepare the entries that are required on December 31, 2020, March 30, 2021, and December 31, 2021. Sheridan does not use reversing entries.

Date	Account Titles and Explanation	Debit	Credit
	(To record interest.)
	(To record depreciation expense.)
	(To record lease payment.)
	(To record interest.)
	(To record depreciation expense.)