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North Corp. entered into a finance lease agreement with South Leasing Ltd. on April 1, 2016. North Corp. agreed to pay South an initial payment of $20,000 on that date and annual payments of $33,308 for the next three years commencing on March 31, 2017, to lease a piece of equipment with a fair value of $100,000. The interest rate implicit in the lease agreement was 12%.
Required:
- Prepare the journal entries to record April 1, 2016 transactions.
- Prepare the lease repayment schedule.
- Prepare the partial balance sheet of North Corp. at December 31, 2018 showing the finance lease balance assuming the December 31 lease payment has been made.
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