On January 1, 2017, Marin Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Marin to make annual payments of $9,353 at the beginning of each year, starting
January 1, 2017. The machine has an estimated useful life e of 6 years and a $4,800 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Marin uses the straight-
line method of depreciation for all of its plant assets. Marin's incremental borrowing rate is 9%, and the lessor's implicit rate is unknown.
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Compute the present value of the minimum lease payments. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 58,971.)
The present value of the minimum lease payments
Prepare all necessary journal entries for Marin for this lease through January 1, 2018. (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 0 for the amounts. Round answers to O decimal places e.g. 58,971.)
Date
Account Titles and Explanation
Debit
Credit
1/1/17
Leased Equipment
Lease Liability
(To record the lease.)
Lease Liability
Cash
(To record first payment.)
12/31/17
Depreciation Expense
Accumulated Depreciation-Capital Leases
(To record depreciation.)
Interest Expense
Interest Payable
(To record interest.)
1/1/18
Lease Liability
Interest Payable
Cash
(To record second payament.)
9,353
9,353
9,353
