Question 3 The following facts pertain to a noncancelable lease agreement between Novak Leasing Company and Splish Company, a lessee. May 1, 2017 Inception date: Annual lease payment due at the beginning of each year, beginning with May 1, 2017 Bargain-purchase option price at end of lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at May 1, 2017 Lessor's implicit rate Lessee's incremental borrowing rate $21,737.01 $3,800 5 years 10 years $68,000 $93,000 10 % 10 % The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs. The expected residual value of the equipment at the end of 5 (10) years is $12,000 ($0). Click here to view factor tables Question 3 Prepare a lease amortization schedule for Splish Company for the 5-year lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25126 and Round answers to 2 decimal places, e.g. 15.25.) SPLISH COMPANY (Lessee) Lease Amortization Schedule Annual Lease Payment Reduction of Plus Interest on Lease BPO Liability Liability Date Lease Liability 5/1/17 93,000 5/1/17 21,737.01 21,737.01 71,262.99 5/1/18 21,737.01 7,126.30 14,610.71 56,652.28 5/1/19 21,737.01 5,665.23 16,071.78 40,580.50 5/1/20 21,737.01 4,058.05 17,678.96 22,901.54 5/1/21 21,737.01 2,290.15 19,446.86 3,454.68 4/30/22 3,800 345.32 3,454.68 .15 112,485.05 + 19,485.05 + 93,000 (d) Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2017 and 2018. Splish's annual accounting period ends on December 31. Reversing entries are used by Splish. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and Round answers to 2 decimal places, e.g. 15.25.) Date Account Titles and Explanation Debit Credit (To record the lease.) (To record the first lease payment.) (To To record interest.) (To record depreciation.) 5/1/18 (To record interest.) (To record depreciation.)