Scuppermong Farms signed an agreement on January 1, Year 1 to lease a cultivator from Tyrrell Equipment. The lease terms, provisions, and other related events are as follows: The lease is...

Prepare all the journal entries for Scuppermong for Years 1 and 2.

Extracted text: Scuppermong Farms signed an agreement on January 1, Year 1 to lease a cultivator from Tyrrell Equipment. The lease terms, provisions, and other related events are as follows: The lease is non-cancellable and has a term of 6 years. The annual rentals are $46,550, payable at the beginning of each year. The rental fee includes $550 for a service contract provided by Tyrell. Scuppermong Farms guarantees a residual value of $25,000 although Tyrell expects it to have a residual value of $32,269 at the end of 6 years. The interest rate implicit in the lease is 8%, which is known by Scuppermong. Scuppermong Farms' incremental borrowing rate is 9% and it uses the straight-line method to record depreciation on similar equipment. The fair value of the cultivator to Tyrell is $250,000 and its cost is $200,000. It has an economic life of 8 years. In addition, Tyrell paid $3,000 in commissions to the broker who arranged the deal. The equipment is not of a specialized nature. The title remains with Tyrrell Equipment and there is no bargain purchase option. Round all answers to the nearest dollar.