arvey Company (the lessee) entered into an equipment lease with Richie Company (the lessor) on January 1 of Year 1. 1. The equipment reverts back, to the lessor at the end of the loase, and thore is no bargain purchase cption. 2. The lease term is 5 yeare and requires Garvey to make annual payments of $65,949.37 at the end of each year. 3. The discount rate is 10%, which is impliclt in the lease, Garvey lonows this; and this rate is lawer than its incremental borrowing rate. 4. The equipment's tair value at the lease inception is $250,000. The present value of an ordinary annuly of flvo payments of $65,949.37 each at 10% is $250,000. 5. The equipment has an estimated economic lito of 7 yours and has zero residual valuo at the end of this time. Straight-line depreciation is used for similar assots. Required: Prepare the journal ontries that Garvey Company would make in the first year of the loatse assuming the loase is classitiled as a capitar loase. Assume that Garvey is required to make payments on December st each year