The police department of Titusville signed a noncancelable lease for computer equipment. The lease was for 5 years, the economic life of the property. The fair market value of the equipment (and present value of the minimum rentals) is $\$ 18,954$. The city's incremental borrowing rate is 10 percent. The annual rentals are $\$ 5,000$ and are due on the first day of the year, beginning January $1,2004$.
Required: Assuming the equipment is delivered when the lease is signed, prepare all journal entries necessary to record the lease for 2004 and the payment made in 2005.