Travis Company leased equipment from Bobby, Inc. on January 1, 2017. Bobby purchased the equipment at a cost of $222,664.

Other information:

Lease Term 3 years

Annual Payments $80,000 on January 1 each year

Life of asset 3 years

Fair value of asset $222,664

Implicit interest rate 8%

Incremental rate 8%

There is no expected residual value

Prepare appropriate journal entries for Bobby, Inc for 2017. Assume a December 31 year-end.