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Sunland Corporation enters into a 7-year lease of equipment on December 31, 2016, which requires 7...

Sunland Corporation enters into a 7-year lease of equipment on December 31, 2016, which requires 7 annual payments of $39,300 each, beginning December 31, 2016. In addition, Sunland guarantees the lessor a residual value of $19,200 at the end of the lease. However, Sunland believes it is probable that the expected residual value at the end of the lease term will be $9,200. The equipment has a useful life of 7 years. Prepare Sunlands' December 31, 2016, journal entries assuming the implicit rate of the lease is 9% and this is known to Sunland.

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