Reference no: EM131947033

Ralph Corporation agreed to lease a piece of equipment to Amy Company on January 1, Year One. The following information relates to this lease: < The lease term is five years, at the end of which time the equipment will revert back to Ralph. The life of the equipment is expected to be six years. < Payments of $90,000 will be due at the beginning of each year, with the first payment to be made at the signing of the lease. < Amy’s incremental borrowing rate is 8 percent. The present value of a single payment of $1 in five years at an annual interest rate of 8 percent is $0.68058. The present value of an ordinary annuity of $1 for five years at an annual interest rate of 8 percent is $3.99271. The present value of an annuity due of $1 for five years at an annual interest rate of 8 percent is $4.31213. Prepare the following journal entries for Amy. a. Record the signing of the lease on January 1, Year One. b. Record the first payment on January 1, Year One. c. Record depreciation on the equipment on December 31, Year One. d. Record interest on the liability on December 31, Year One. e. Record the second payment on January 1, Year Two.