A lessor and lesse enter into a lease $0$agreement whereby an $18$ wheelerj with a fair of $$130,000$ and a useful life of five years will be leased for a period of four years. The lease payments will be made at the beginning of each year. The residual value at the end of the lease term is expected to be $$20,000.$ The residual value at the end of the asset$$s useful life is expected to be $$15,000.$ At the end of the two years the lessee has the option to purchase the truck for $65,000.$ The fair market value of the truck is estimated to be $90,000.$ The lessor requires a rate of return of $12\%$ on his net investment. The lessee can borrow to purchase the truck at a $10\%$ interest rate. The lessee knows the lessor$$s implicit rate. Lease payment is $$41,303.$

For the lessee,

$4.$ Make the journal entries for the first year of the lease term.

LEASED TRUCK

CASH

LEASE LIABILITY

INTEREST EXPENSE

INTEREST PAYABLE

AMORTIZATION EXPENSE

ACCUM AMORTIZATION

$5.$ Make all lessee journal entries for the rest of the lease term.