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Problem 21A-3 a-d Ludwick Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2017. Annual rental payments of $40,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Ludwick's incremental borrowing rate is 8% . Ludwick unaware of the rate being used by the lessor. At the end of the lease, Ludwick has the option o buy the equlpment for $5,000, conslderably below its estimated falr value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Ludwick uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables Your answer is partlally correct. Try again. Prepare the journal entries, that Ludwick should record on December 31, 2017. (Credit account titles are automatically indented when amount If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places, e.g. 58,971.) entered. Do not indent manually. Account Titles and Explanation Debit Credit Date December 31, 2017 Leased Asset 172485 Lease Liability 172485 (To record leased asset and related liability.) Lease Liability 40000 Cash 40000 (To record the first rental payment.) Your answer is partially correct. Try again. Prepare the journal entries, that Ludwick should record on December 31, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter for the amounts.) Account Titles and Explanation Credit Date Debit December 31, 2018 Depreciation Expense 2464 x Accumulated Depreclation-Leased Equipment 24641 (To record amortization.) Lease Liability 29401 Interest Expense 10599 cash 40000 (To record annual payment on lease liability.) Your answen partially correct. Try again ntered. Do not indent manually. nO antr d select”No Entry” for the acCount titles and enter 0 for the amounts. Round answers to 0 decimal places a a 58 971.) is re Account Titles and Explanation Debit Credit Date December 31, 2019 Depreciation Expense 24641 Accumulated Depreciation- Leased Equipment 24641 (To record annual amortization on leased assets.) Lease Liability 32888 Interest Expense 8247 Cash 24641 (To record annual payment on lease liability.) Your answer is partially correct. Try again. What amounts would appear on Ludwick's December 31, 2019, balance sheet relative to the lease arrangement? (Round answers to 0 decimal places, e.g. 58,971.) LUDWICK STEEL COMPANY Balance Sheet December 31, 2019 Assets Non-current Assets 123203 Leased Equipment Liabilities Current Liabilities Interest Expense 8247 Long-term Liabilities Lease Liability 71331