Splish 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 $170,000. 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 $38,749 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 7%, while Splishs borrowing rate is 8%. Splish 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 OF 1.

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 Splishs 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 Splish 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	Interest ExpenseMaintenance and Insurance ExpenseCashObligations under LeaseAccumulated Depreciation-Leased EquipmentEquipment under LeaseDepreciation ExpenseInterest PayablePrepaid Maintenance and Insurance
	CashAccumulated Depreciation-Leased EquipmentMaintenance and Insurance ExpenseInterest ExpenseDepreciation ExpensePrepaid Maintenance and InsuranceInterest PayableEquipment under LeaseObligations under Lease
	(To record inception of lease.)
Jan. 1Dec. 31	Interest PayableAccumulated Depreciation-Leased EquipmentObligations under LeaseEquipment under LeaseInterest ExpenseDepreciation ExpensePrepaid Maintenance and InsuranceCashMaintenance and Insurance Expense
	Prepaid Maintenance and InsuranceAccumulated Depreciation-Leased EquipmentCashDepreciation ExpenseInterest PayableEquipment under LeaseInterest ExpenseObligations under LeaseMaintenance and Insurance Expense
	(To record lease payment.)
Jan. 1Dec. 31	Interest PayableCashPrepaid Maintenance and InsuranceObligations under LeaseInterest ExpenseAccumulated Depreciation-Leased EquipmentEquipment under LeaseDepreciation ExpenseMaintenance and Insurance Expense
	Prepaid Maintenance and InsuranceInterest ExpenseInterest PayableEquipment under LeaseMaintenance and Insurance ExpenseCashDepreciation ExpenseAccumulated Depreciation-Leased EquipmentObligations under Lease
	(To record interest.)
Jan. 1Dec. 31	Interest PayableObligations under LeaseAccumulated Depreciation-Leased EquipmentEquipment under LeaseDepreciation ExpenseMaintenance and Insurance ExpenseInterest ExpensePrepaid Maintenance and InsuranceCash
	Accumulated Depreciation-Leased EquipmentObligations under LeaseCashPrepaid Maintenance and InsuranceMaintenance and Insurance ExpenseInterest ExpenseEquipment under LeaseInterest PayableDepreciation Expense
	(To record depreciation expense.)