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Use the following information for Problems #8-9(Based on E21-1): Lessee...

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Accounting

Use the following information for Problems #8-9(Based on E21-1):
Lessee Entries, Capital Lease with Unguaranteed Residual Value: On January 1,2012, Adams Corporation signed a 5-year non-cancelable lease for a machine. The terms of the lease called for Adams to make annual payments of $19,936 at the beginning of each year, starting January 1,2012. The machine has an estimated useful life of 6 years and a $5,000 unguaranteed residual value. The machine reverts back to the Lessor at the end of the lease term.
Adams uses the straight-line method of depreciation for all of its plant assets. Adams's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown.
8] Compute the present value of the Minimum Lease Payments (Note: Use P.V. of annuity due)
9] Prepare all necessary journal entries for Adams for this lease for year 2012. Use the template below:
Debit
Credit
1-Jan
\table[[Leased Equipment,,],[Lease Liability,,]]
\table[[Lease Liability,,],[Cash,,]]
31-Dec
\table[[Interest Expense,,],[Interest Payable,,]]
\table[[Depreciation Expense,,],[Accumulated Depreciation,,]]
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