Southwestern Edison Company leased equipment from Hi-Tech Leasing on January 1, 2018. Hi-Tech manufactured the equipment at a cost of $88,500.

Other information:

Lease term 3 years

Annual payments $37,000 on January 1 each year

Life of asset 3 years

Fair value of asset $102,087

Implicit interest rate 9%

Incremental rate 9%

There is no expected residual value.

Required: Prepare appropriate journal entries for Hi-Tech Leasing for 2018. Assume a December 31 year-end.

1. Record the lease on January 1, 2018.

2. Record the cash received Jan. 1 2018

3. Record interest revenue Dec. 31, 2018