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On December 31, 2016, Tamarisk Corporation signed a 5-year, non-cancelable lease for a machine. The terms...

On December 31, 2016, Tamarisk Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Tamarisk to make annual payments of $8,978 at the beginning of each year, starting December 31, 2016. The machine has an estimated useful life of 6 years and a $5,200 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Tamarisk uses the straight-line method of depreciation for all of its plant assets. Tamarisk’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown.

Prepare all necessary journal entries for Tamarisk for this lease through December 31, 2017.

a. To record the lease

Account Title Debit Credit

b. To record first lease payment

Account Title Debit Credit

c. To record amortization of right-of-use asset

Account Title Debit Credit

d. To record interest expense

Account Title Debit Credit
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