Western Plants Co. (Western) leased a new forklift on January 1. The lease agreement is for eight years, with an annual payment of $4,700 due at the beginning of each Western has the option to buy the forklift at the end of the lease for $5,500, which is the estimated market value at that time. Alternatively, the compary management has not decided whether to buy the asset at the end of the lease. The forkift would likelly have another taro years of useful life if purchas

Western had the opportunity to purchase the forklift from the dealer for $33,856 but

chose to lease instead. The company would have had to borrow from the bank to finance the purchase. The interest rate at that time was 7%. The rate improt in the $25,000.

Required

a) Assuming Western reports under IRS, prepare the journal entries for the first year of the lease