Northwestern Edison Company Leased Equipment from Hi-Tech Leasing on January

Northwestern Edison Company leased equipment from Hi-Tech Leasing on January 1, 2018. Hi-Tech manufactured the equipment at a cost of $90,000.
Other information: $$\begin{array} { | l | l | } \hline \text { Lease term } & 3 \text { years } \\\hline \text { Annual payments } & \$ 40,000 \text { on January } 1 \text { each year } \\\hline \text { Life of asset } & 3 \text { years } \\\hline \text { Implicit interest rate } & 8 \% \\\hline \text { Incremental rate } & 8 \% \\\hline \text { PV, annuity due, } 3 \text { periods, } 8 \% & 2.7833 \\\hline \text { PV, ordinary annuity, } 3 \text { periods, } 8 \% & 2.5771 \\\hline\end{array}$$ There is no expected residual value.
Required: Prepare appropriate journal entries for Hi-Tech Leasing for 2018 and 2019. Assume a December 31 year-end. Round your answers to the nearest whole dollar amounts.

Correct Answer:

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January 1, 2018:
Lease receivable 111,33...

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