Blue Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $55,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Blues incremental borrowing rate is 8%. Blue is unaware of the rate being used by the lessor. At the end of the lease, Blue has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Blue uses the straight-line method of depreciation on similar owned equipment.

A. Prepare the journal entries, that Blue should record on December 31, 2020

B. Prepare the journal entries, that Blue should record on December 31, 2021

C. Prepare the journal entries, that Blue should record on December 31, 2022

**WORKING NOTES WILL BE MUCH APPRECIATED**

What amounts would appear on Blue's December 31, 2022, balance sheet relative to the lease arrangement? (Round answers to O decimal places, e.g. 58,971.) BLUE STEEL COMPANY Balance Sheet Assets $ Liabilities $ $