On June 30, 2018, Hercule, Inc. leased warehouse equipment from Marble, Inc. The lease agreement calls for Hercule to make semiannual lease payments of $1,688,721 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Hercule's incremental borrowing rate is 10%, the same rate Marble used to calculate lease payment amounts. Marble manufactured the equipment at a cost of $7.5 million.
Present value factor of an annuity due of $1: n=6, i=5% is 5.32948
Required:
Round your answers to the nearest whole dollar amounts.
1. Determine the price at which Marble is "selling" the equipment (present value of the lease payments) at June 30, 2018 (to the nearest $000).
2. Prepare the appropriate journal entries related to the lease for Marble (lessor) on June 30, 2018.
3. Prepare the appropriate journal entries related to the lease for Marble (lessor) on December 31, 2018.
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