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Waterway Leasing Company agrees to lease equipment to Wildhorse Corporation on January 1, 2020. The following information relates to the lease agreement 1. 2. 3. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $ 500,000, and the fair value of the asset on January 1, 2020, 5$ 659.000 At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $ 60.000. Wildhorse estimates that the expected residual value at the end of the lease term will be 60.000. Wildhorse amortires all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2020, The collectibility of the lease payments is probable. Waterway desires a 9% rate of return on its investments. Wildhorse's incremental borrowing rate is 10%, and the lessor's implicitrate is unknown 4. 5. 6. (Assume the accounting period ends on December 31) Discuss the nature of this lease for both the lessee and the lessor. This is a hinance lease for Wildhorse. This is a finance for Waterway e Textbook and Media List of Accounts Calculate the amount of the annual rental payment required. (Round present value factor cakulations to 5 decimal places 1.25124 and the final answer to decimal placeses 58,972.) Annual rental payment $ 114143 Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, es 125124 and the final answer to decimal places es 58,972) Present value of minimum lease payments eTextbook and Media List of Accounts Prepare the journal entries Wildhorse would make in 2020 and 2021 related to the lease arrangement. (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 for the amounts. Round answers to decimal places es 58.972. Record journal entries in the order presented in the problem Prepare the journal entries Wildhorse would make in 2020 and 2021 related to the lease arrangement. (Credit occount 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 for the amounts. Round answers to 0 decimal places eg. 58,972. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit (To record the lease) (To record lease payment.) (To record amortization.) (To record amortization.) (To record interest.) (To record amortization.) (To record interest.) Prepare the journal entries Waterway would make in 2020 and 2021 related to the lease arrangement. (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 for the amounts Round answers to decimal places es. 58,972. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit (To record the lease) (To record lease payment.) (To record lease payment.) cTextbook and Media List of Accounts Suppose Wildhorse expects the residual value at the end of the lease term to be 550.000 but still guarantees a residual of $ 60.000. Compute the value of the lease liability at lease commencement Lease liability 5

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