Answer Happy

Decatur Inc. agrees to lease equipment from the Bridgeport Corp. for 10 years at $20,000 at the end of each year. The equipment has a fair value of $175,000 and an estimated useful life of 10 years. The lease includes a guaranteed residual value of $5,000. In addition to the lease payments, Decatur will pay $5,000 per year for a maintenance agreement. Decatur can finance this lease with its bank at a 12% rate. The lessor's implicit lease rate, known to the lessee, is 10%. The lessor and the lessee use ASC 840 guidelines for lease accounting. Present value interest factors are 10% 12% PV factor of $1 for 10 periods 0.38554 0.32197 PV factor for ordinary annuity for 10 periods 6.14457 5.65022 The entry to record this lease on Decatur's books is (round all calculations to the nearest whole dollar amount) DR Leased equipment - capital lease 194,819 CR Obligation under capital lease 194,819 DR Leased equipment - capital lease 124,819 CR Obligation under capital lease 124,819 DR Leased equipment - capital lease 124,819 DR Discount on lease obligation 75,181 CR Obligation under capital lease 200,000 DR Leased equipment - capital lease 155,542 CR Obligation under capital lease 155,542