On january 1, 2018, maywood hydraulics leased drilling equipment from aqua leasing for a three-year period ending december 31, 2021, at which time possession of the leased asset will revert back to aqua. the equipment cost aqua $413,307 and has an expected economic life of four years. aqua expects the residual value at december 31, 2018, to be $51,000. negotiations led to maywood guaranteeing a $71,500 residual value.
equal payments under the lease are $100,000 and are due on december 31 of each year with the first payment being made on december 31, 2018. maywood is aware that aqua used a 5% interest rate when calculating lease payments. required: 1. prepare the appropriate entry for maywood on january 1, 2018, to record the lease.2. prepare all appropriate entries for maywood on december 31, 2018, related to the lease.