Use the following information for Problems #$8-9($Based on E$21-1)$:

Lessee Entries, Capital Lease with Unguaranteed Residual Value: On January $1,2012,$ Adams Corporation signed a $5-$year non$-$cancelable lease for a machine. The terms of the lease called for Adams to make annual payments of $$19,936$ at the beginning of each year, starting January $1,2012.$ The machine has an estimated useful life of $6$ years and a $$5,000$ unguaranteed residual value. The machine reverts back to the Lessor at the end of the lease term.

Adams uses the straight$-$line method of depreciation for all of its plant assets. Adams's incremental borrowing rate is $10\%,$ and the lessor's implicit rate is unknown.

$8]$ Compute the present value of the Minimum Lease Payments $($Note: Use P$.$V$.$ of annuity due$)$

$9]$ Prepare all necessary journal entries for Adams for this lease for year $2012.$ Use the template below:

Debit

Credit

$1-$Jan

$\backslash$table$[[$Leased Equipment,,$],[$Lease Liability,,$]]$

$\backslash$table$[[$Lease Liability,,$],[$Cash$,,]]$

$31-$Dec

$\backslash$table$[[$Interest Expense,,$],[$Interest Payable,,$]]$

$\backslash$table$[[$Depreciation Expense,,$],[$Accumulated Depreciation,,$]]$