Truck Corp. is a manufacturer of truck trailers. On April 1, 2020, Truck Corp. leases ten trailers to Wildcat Company under a six-year noncancelable lease agreement. The following information about the lease and the trailers is provided:

1.Equal annual payments that are due starting on April 1, 2020 provide TruckCorp. with an 8% return on net investment, unknown to Wildcat Company.

2.There is a guaranteed residual value of $5,000 for each trailer,and based on past leases, Wildcat Co is expected to pay approximately $2,000 per trailer under this agreement.

3.The fair value of each trailer is $65,000. The cost of each trailer to Truck Corp. is $45,000. Each trailer has an expected useful life of nine years.

4.Wildcats borrowing rate is 11%Instructions

ANSWER THE FOLLOWING:

(A) Calculate the annual lease payment.(Round to nearest dollar.)

(B) Prepare the journal entries for both the lessee and lessor for 2020 to record the lease agreement and the year-end entries. Round all amounts to the nearest dollar.

PLEASE SHOW ALL WORK/CALCULATIONS, THANK YOU