Vaughn Leasing Company agrees to lease machinery to Bramble Corporation on January 1, 2017. The following information relates to the lease agreement.

1.		The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.
2.		The cost of the machinery is $575,000, and the fair value of the asset on January 1, 2017, is $755,000.
3.		At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $103,000. Bramble depreciates all of its equipment on a straight-line basis.
4.		The lease agreement requires equal annual rental payments, beginning on January 1, 2017.
5.		The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor.
6.		Vaughn desires a 9% rate of return on its investments. Brambles incremental borrowing rate is 10%, and the lessors implicit rate is unknown.

(Assume the accounting period ends on December 31.)

Annual Rental Payment _____________

Present Value of Minimum Lease Payments__________

Prepare Journal Entries Bramble would make in 2017 and 2018

Prepare Journal Entries Vaughn would make in 2017 and 2018