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Vaughn Corporation enters into a 6-year lease of equipment on January 1, 2017, which requires 6 annual payments of $41,600 each, beginning January 1, 2017.

Vaughn Corporation enters into a 6-year lease of equipment on January 1, 2017, which requires 6 annual payments of $41,600 each, beginning January 1, 2017. In addition, Vaughn guarantees the lessor a residual value of $19,800 at lease-end. The equipment has a useful life of 6 years. Prepare Vaughn January 1, 2017, journal entries assuming an interest rate of 10%.

Date Account Titles and Explanation Debit Credit January 1, 2017 Leased Equipment 97410.75 Lease Liability 97410.75 (To record the lease.) January 1, 2017 Lease Liability 19800 cash 19800

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