View Policies Show Attempt History Current Attempt in Progress Sheffield Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $53,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Sheffield's incremental borrowing rate is 9%. Sheffield is unaware of the rate being used by the lessor. At the end of the lease, Sheffield has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sheffield uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. (a) Your Answer Correct Answer Your answer is partially correct. Prepare the journal entries, that Sheffield should record on December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to O decimal places, e.g. 58,971.) Date Account Titles and Explanation December Debit Credit Question 3 of 3 < > Your Answer Correct Answer -Your answer is partially correct. 0.28/1 E Prepare the journal entries, that Sheffield should record on December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places, e.g. 58,971.) Date Account Titles and Explanation December 31,2020 Leased Equipment Lease Liability (To record leased asset and related liability.) Lease Liability Cash (To record the first rental payment.) eTextbook and Media Solution Debit 224705 53000 Credit (b) Your answer is partially correct. Prepare the journal entries, that Sheffield should record on December 31, 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation December Depreciation Expense 31, 2021 Accumulated Depreciation-Capital Leases (To record amortization.) Lease Liability Interest Expense Cash (To record annual payment on lease liability.) eTextbook and Media Debit 32100 37546.64 15453.36 Credit 32100 53000