Question: Captain Hook leased a pirate ship from Peter Pan on January 1, 2021. The lease is for three (3) years and requires annual lease payments

Captain Hook leased a pirate ship from Peter Pan on January 1, 2021. The lease is for three (3) years and requires annual lease payments of $40,000 due at the beginning of each year. The lease does NOT meet any of the five lease classification tests. The pirate ship originally cost Peter Pan $400,000 and he has depreciated it on a straight-line basis at a rate of $50,000 per year. The implicit rate in the lease is 7% and the present value of the lease payments is $112,321. Prepare three sets of journal entries related to the lease: 1. Captain Hook's entry(ies) on January 1, 2021 (lessee) 2. Peter Pan's entry(ies) on January 1, 2021 (lessor) 3. Peter Pan's entry(ies) on December 31, 2021 (lessor)

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