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Glaus Leasing Company agrees to lease equipment to Jensen Corporation on January 1, 2025. 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 $525,000, and the fair value of the asset on January 1,2025 , is $700,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Jensen estimates that the expected residual value at the end of the lease term will be $50,000. Jensen amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. 5. The collectibility of the lease payments is probable. 6. Glaus desires a 5% rate of return on its investments. Jensen's incremental borrowing rate is 6%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. (Assume the accounting period ends on December 31.) Calculate the amount of the annual rental payment required. Annual rental payment Compute the present value of the minimum lease payments. Present value of minimum lease payments Prepare the journal entries Sage would make in 2017 and 2018 related to the lease arrangement Prepare the journal entries Sage would make in 2017 and 2018 related to the lease arrangement (To record the lease.) (To record lease payment.) (To record deprecation.) (To record interest) 1/1/18 Accumulated Depreciation-Cspitsl Leases (To record depreciation.) (To record interest.) Prepare the journal entries Headland would make in 2017 and 2018. Glaus Leasing Company agrees to lease equipment to Jensen Corporation on January 1, 2025. 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 $525,000, and the fair value of the asset on January 1,2025 , is $700,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Jensen estimates that the expected residual value at the end of the lease term will be $50,000. Jensen amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. 5. The collectibility of the lease payments is probable. 6. Glaus desires a 5% rate of return on its investments. Jensen's incremental borrowing rate is 6%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. (Assume the accounting period ends on December 31.) Calculate the amount of the annual rental payment required. Annual rental payment Compute the present value of the minimum lease payments. Present value of minimum lease payments Prepare the journal entries Sage would make in 2017 and 2018 related to the lease arrangement Prepare the journal entries Sage would make in 2017 and 2018 related to the lease arrangement (To record the lease.) (To record lease payment.) (To record deprecation.) (To record interest) 1/1/18 Accumulated Depreciation-Cspitsl Leases (To record depreciation.) (To record interest.) Prepare the journal entries Headland would make in 2017 and 2018

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