CALCULATOR PRINTER VERSION 4 NEXT Brief Exercise 21A-27 Ivanhoe Co. leased machinery from Young, Inc. on January 1, 2017. The lease term was for 8 years, with equal annual rental payments of $5,700 at the beginning of each year. In addition, the lease provides an option to purchase the machinery at the end of the lease term for $3,000, which Ivanhoe is reasonably certain it will exercise as it believes the fair value of the machinery will be at least $6,000. The machinery has a useful life of 10 years and a fair value of $35,000. The implicit rate of the lease is not known to Ivanhoe. Ivanhoe's incremental borrowing rate is 7%. Prepare Ivanhoe's 2017 journal entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275.) Click here to view the factor table. Date Account Titles and Explanation 1/1/17 Right-of-Use Asset Debit Credit Lease Liability (To record lease liability) 1/1/17 Lease Liability Cash I (To record lease payment) 12/31/17 Interest Expense Lease Liability (To record interest expense) 12/31/17 Amortization Expense Right-of-Use Asset (To record amortization of the right-of-use asset)