Assume thatIBMleased equipment that was carried at a cost of $113,000 to Oriole Company. The term of the lease is 5 years December 31, 2019, with equal rental payments of $26,205 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $112,999. The equipment has a useful life of 5 years with no salvage value. The lease has an implicit interest rate of 8%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Assume the sales-type lease was recorded at a present value of $112,999.

Prepare IBM's December 31, 2020, entry to record the lease transaction with Oriole Company.

What are the journal entries for this problem: