Swifty 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 Swiftys borrowing rate is 8%. Swifty 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 Swiftys 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 Swifty 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 ExpenseCashDepreciation ExpenseMaintenance and Insurance ExpenseObligations under LeasePrepaid Maintenance and InsuranceEquipment under LeaseAccumulated Depreciation-Leased EquipmentInterest Payable
	Maintenance and Insurance ExpenseAccumulated Depreciation-Leased EquipmentInterest PayableInterest ExpenseObligations under LeaseEquipment under LeaseCashPrepaid Maintenance and InsuranceDepreciation Expense
	(To record inception of lease.)
Jan. 1Dec. 31	Accumulated Depreciation-Leased EquipmentMaintenance and Insurance ExpenseInterest PayablePrepaid Maintenance and InsuranceInterest ExpenseObligations under LeaseCashEquipment under LeaseDepreciation Expense
	Depreciation ExpenseEquipment under LeasePrepaid Maintenance and InsuranceCashInterest ExpenseObligations under LeaseAccumulated Depreciation-Leased EquipmentMaintenance and Insurance ExpenseInterest Payable
	(To record lease payment.)
Jan. 1Dec. 31	Obligations under LeaseCashPrepaid Maintenance and InsuranceInterest PayableAccumulated Depreciation-Leased EquipmentMaintenance and Insurance ExpenseEquipment under LeaseInterest ExpenseDepreciation Expense
	Maintenance and Insurance ExpenseAccumulated Depreciation-Leased EquipmentObligations under LeaseInterest ExpenseCashInterest PayableDepreciation ExpensePrepaid Maintenance and InsuranceEquipment under Lease
	(To record interest.)
Jan. 1Dec. 31	Interest PayableEquipment under LeaseObligations under LeaseDepreciation ExpenseCashAccumulated Depreciation-Leased EquipmentMaintenance and Insurance ExpenseInterest ExpensePrepaid Maintenance and Insurance
	Accumulated Depreciation-Leased EquipmentInterest ExpenseDepreciation ExpenseCashEquipment under LeaseMaintenance and Insurance ExpensePrepaid Maintenance and InsuranceObligations under LeaseInterest Payable
	(To record depreciation expense.)