Stillwater Sports
Stillwater Sports Company Leased Manufacturing Equipment from Premier

Essay

Stillwater Sports
Stillwater Sports Company leased manufacturing equipment from Premier Leasing on January 1 of the current year. Premier purchased the equipment for $326,189.
Other information:
$$\begin{array} { l l } \text { Lease term } & 4 \text { years } \\\text { Annual Payments } & \$ 90,000 \text { on January } 1 \text { beginning with the current year. } \\\text { Life of Asset } & 4 \text { years } \\\text { Fair value of Asset } & \$ 326,189 \\\text { Implicit interest rate } & 7 \% \\\text { Incremental rate } & 7 \%\end{array}$$
There is no expected residual value or bargain purchase option. Assume that depreciation expense is computed at December 31 of each year.
-Refer to Stillwater Sports:
Required:
1. Prepare appropriate journal entries for Stillwater Sports for the first year.
2. Show how the lease-related information will be presented on Stillwater's balance sheet for the first year.