Keener Construction Ltd. leased equipment for five years from Dominion Leasing Inc. for use in a building project. At the end of the five-year term, Keener returns the asset to Dominion Leasing Inc. and has a residual value guarantee of $80,000. No renewal option is available to Keener. The lease commences on 1 May 20X5. Annual lease payments including maintenance are $185,000 due at the beginning of each lease year. Based on allocating the lease payment on relative standalone prices, the lease component is $160,000 and the non-lease component for maintenance is $25,000. The equipment has a fair value of $900,000 at the inception of the lease. The lessee is not aware of the lessor’s implicit rate of interest in the lease. Keener s incremental borrowing rate is 6%. The lessee’s fiscal year ends on 31 December.

Required:
1. Record the right-of-use asset and lease liability on 1 May 20X5.
2. Prepare the lease liability amortization table for the lease contract (lessee perspective).
3. Record all journal entries pertaining to 20X5 and 20X6.
4. At the end of the lease term, Keener Construction Ltd. returns the leased asset to the lessor. Assume that the actual payment under the guarantee is now $70,000. How should Keener account for this?