Exercise 21-1 On January 1, 2017, Burke Corporation signed a 5-year noncancelabl

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Exercise 21-1 On January 1, 2017, Burke Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $8,668 at the beginning of each year, starting January 1, 2017. The machine has an estimated useful life of 6 years and a $5,000 unguarantee esidual value. The machine reverts back to the lessor at the end of the lease term. Burke uses the straight-line method of depreciation for all of its plant assets. Burke's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown. Compute the present value of the minimum lease payments. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) The present value of the minimum lease payments s

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1 Present Value of minimum lease payment 8668*4.16986 $ 36144 Present value of an annuity due of 1 for 5 periods at 10%=4.16986 2. Journal Date Account Debit Credit 01-01-2017 Lease Machine 36144 Lease Liability 36144 01-01-2017 Lease Liability 8668 Cash 8668 31-12-2017 Depreciation 7229 Accumulated Depreciation 7229 (36144/5) 31-12-2017 Interest Expense 2748 Interest Payable 2748 (36144-8668)*10% 01-01-2018 Lease Liability (8668-2748) 5920 Interest Payable 2748 Cash 8668

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