Lessee Ltd. agreed to a noncancellable lease for which the following information is available:
a. The asset is new at the inception of the lease term and is worth $160,000.
b. Lease term is four years, starting 1 January 20X1.
c. Estimated useful life of the leased asset is six years.
d. The lessee has guaranteed the residual value of the leased asset. At inception of the lease, it is estimated $30,000 will have to be paid at the end of the lease term.
e. The declining-balance depreciation method is used for the leased asset, at a rate of 30% per year.
f. Lessee’s incremental borrowing rate is 10%.
g. Four annual lease payments will be made each 1 January during the lease term, and the first payment, due at inception of the lease term, is $37,630.
h. Lessee has a 31 December fiscal year-end.

Required:
1. Prepare a table showing how the lease liability reduces over the lease term.
2. Record the entries for 20X1.
3. Prepare the financial statement presentation of all lease-related accounts as they would appear in the financial statements of the lessee at 31 December 20X1.
4. Assume that on 1 January 20X3, the lessee determines that the expected residual guarantee value is now $10,000 instead of the initial $30,000. How does this impact the lease liability? What journal entry must be recorded?