Kubby NV specializes in leasing large storage units to other businesses. Kubby entered a contract to lease a storage unit to Riskey Ltd. for 4 years when that particular storage unit had a remaining useful life of 5 years. The fair value of the unit was €10,000 at the commencement of the lease on January 1, 2022. The present value of the 5 equal rental payments of €2,507 at the start of each year, plus the present value of a guaranteed residual value of €1,000, equals the fair value of €10,000, Kubby’s implicit rate of return on the lease of 6%. The following is a correct, complete amortization schedule created by Kubby.

Given the above schedule, make the appropriate entries at December 31, 2025, for Kubby to record the accrual of interest and the return of the storage unit to Kubby (assuming the unit is returned on December 31, 2025, at the expected and guaranteed residual value of €1,000).

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Interest (6%) on Outstanding Reduction Balance Lease Lease of Lease of Lease Date Payment Receivable Receivable Receivable 1/1/22 €10,000 1/1/22 € 2,507 € 2,507 7,493 1/1/23 2,507 € 450 2,057 5,436 1/1/24 2,507 326 2,181 3,255 1/1/25 2,507 195 2,312 943 12/31/25 1,000 57 943 €11,028 €1,028 €10,000