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On December 31, 2019, Teal Mountain Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Teal Mountain to make annual payments of $8,634 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $4,900 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Teal Mountain uses the straight-line method of depreciation for all of its plant assets. Teal Mountains incremental borrowing rate is 12%, and the lessors implicit rate is unknown.

View Policies Show Attempt History Current Attempt in Progress On December 31, 2019, Teal Mountain Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Teal Mountain to make annual payments of $8,634 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $4,900 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Teal Mountain uses the straight-line method of depreciation for all of its plant assets. Teal Mountain's incremental borrowing rate is 12%, and the lessor's implicit rate is unknown. Click here to view factor tables. Your answer is correct. What type of lease is this? This is a/an finance lease. e Textbook and Media List of Accounts Your answer is correct. Compute the present value of the lease payments. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.) Present value of the lease payments $ 34858 e Textbook and Media List of Accounts Prepare all necessary journal entries for Teal Mountain for this lease through December 31, 2020. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit 2/31/19 Right-of-Use Asset 34858 Lease Liability 34858 (To record the lease) 2/31/19 Lease Liability 8634 Cash 8634 (To record first lease payment) 2/31/20 Depreciation Expense 6972 Accumulated Depreciation-Right-of-Use Asset 6972 (To record amortization of the right-of-use asset) 2/31/20 Lease Liability 6346 Interest Expense 2288 Cash 8634 (To record interest expense) e Textbook and Media