Ayayai Corporation leased equipment to Kingbird, Inc. on January 1, 2020. The lease agreement called for annual rental payments of $1,098 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $7,200, a book value of $5,200, and Ayayai expects a residual value of $4,700 at the end of the lease term. Ayayai set the lease payments with the intent of earning a 5% return, though Kingbird is unaware of the rate implicit in the lease and has an incremental borrowing rate of 7%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.

1.

Prepare all necessary journal entries for Kingbird in 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit
1/1/2012/31/20
	(To record the lease)
1/1/2012/31/20
	(To record lease payment)
1/1/2012/31/20

2.

Prepare all necessary journal entries for Ayayai in 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit
1/1/2012/31/20
	(To record the lease)
1/1/2012/31/20
	(To record lease payment)
1/1/2012/31/20

3.

Suppose the lease were only for one year instead of 3 years, with just one lease payment at the beginning of the lease term. Prepare any journal entries Blossom would need, assuming it elects to use the short-term lease option.

Date	Account Titles and Explanation	Debit	Credit
Jan. 1