Forrest, Inc. has entered an agreement to lease an old warehouse with a useful life of 5 years and a fair value of $20,000 from United Corporation. The agreement stipulates the following.
• Rental payments of $4,638 are to be made at the start of each year of the 5-year lease. No residual value is expected at the end of the lease.
• Forrest must reimburse United each year for any real estate taxes incurred for the year. Last year, the cost of real estate taxes was $700, though these costs vary from year to year.
• Forrest must make a payment of $500 with the rental payment each period to cover the insurance United has on the warehouse.
• Forrest paid legal fees of $1,000 in executing the lease.
Assuming Forrest's incremental borrowing rate is 8% and the rate implicit in the lease is unknown, prepare the journal entry to record the initial lease liability and right-of-use asset for Forrest.