Using the same information presented in E18-7. complete the following requirements:

E18-7.

On January 1. Gump Sales Company entered into an agreement to lease a piece of machinery for a period of 5 years from Smokey Boy Equipment (SBE). The machine is not specialized for Gump's business needs, has a sales price of $70,000. and its useful life is 7 years with no guaranteed residual value. The $15,000 annual rentals are due on January 1 of each year. The lease does not contain a transfer of ownership or a purchase option. Assume that there are no initial direct costs associated with this lease. There are also no nonlease components. SBE's implicit rate is not known to Gump whose incremental borrowing rate is 13%. The carrying value of the equipment to SBE is $70,000, its fair value. Assume that collectable of all lease payments is reasonably assured. Gump's fiscal year ends on December 31.

Required
a. Prepare the entries for the lessor, SBE, for the first year of the lease. Determine the implicit l'ate.
b. Would the accounting for the lessor change if a third party guarantees a residual value of $20,000 and collection of this amount is probable?
c. Prepare the amortisation tables needed (if any) to account for the lease using the pan (b) assumptions.