aura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Sage Hill ompany. The following information relates to this agreement. 1. 2. 3. 4. 5. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2020, is $85,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $5,000, none of which is guaranteed. The agreement requires equal annual rental payments of $27,911 to the lessor, beginning on January 1, 2020. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. 6. Sage Hill uses the straight-line depreciation method for all equipment. Reduction of Lease Liability Lease Liability :0 Annual Lease Payment I SAGE HILL COMPANY (Lessee) Lease Amortization Schedule Interest on Liability :1 12 $ $ $ Prepare all of the journal entries for the lessee for 2020 and 2021 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee's annual accounting period ends on December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to O decimal places, e.g. 5,265. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit (To record the lease) (To record lease payment) (To record interest expense) (To record amortization of the right-of-use asset) (To reverse interest expense) (To record lease payment) (To record lease payment) (To record interest expense) (To record amortization of the right-of-use asset)