Business application- Rigby Corporation has leased a piece of equipment that has a useful life of 12 years. This capital lease requires payments of $86,000 per year for 12 years. Rigby currently is able to borrow money at a long-term interest rate of 15 percent. (Round to the nearest dollar.)
1. Calculate the present value of the lease.
2. Prepare the journal entry to record the lease agreement.
3. Prepare the journal entry to record depreciation of the equipment for the first year using the straight-line method.
4. Prepare the journal entries to record the lease payments for the first two years.