On January 1, 2017, Sandhill Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Sandhill to make annual payments of $8,560 at the beginning of each year, starting January 1, 2017. The machine has an estimated useful life of 6 years and a $4,800 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Sandhill uses the straight-line method of depreciation for all of its plant assets. Sandhill’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown.

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Exercise 21-1

Show List of Accounts


Account Titles and Explanation



(To record the lease.)

(To record first payment.)

(To record depreciation.)

(To record interest.)


(To record second payament.)




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