Tamarisk Corporation enters into a 7-year lease of equipment on December 31, 2016, which requires 7 annual payments of $38,200 each, beginning December 31, 2016. In addition, Tamarisk guarantees the lessor a residual value of $18,500 at the end of the lease. However, Tamarisk believes it is probable that the expected residual value at the end of the lease term will be $8,500. The equipment has a useful life of 7 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $170,000. Prepare Lost Arks 2016 and 2017 journal entries, assuming the implicit rate of the lease is 11% and this is known to Tamarisk. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)

Account Titles and Explanation Debit Credit Date December 31, 2016 (To record the lease) December 31, 2016 (To record receipt of lease payment) December 31, 2017