Vaughn Corporation manufactures replicators. On January 1, 2017, it leased to Althaus Company a replicator that had cost $99,400 to manufacture. The lease agreement covers the 5-year useful life of the replicator and requires 5 equal annual rentals of $44,500 payable each January 1, beginning January 1, 2017. An interest rate of 11% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs.

Date Account Titles and Explanation Debit Credit January 1, 2017 To record the lease.) January 1, 2017 To record cost.) January 1, 2017 To record first lease payment.)