Carla Vista Corporation enters into a 5-year lease of equipment on December 31, 2024, which requires 5 annual payments of $36,200 each, beginning December 31, 2024. In addition, Carla Vista guarantees the lessor a residual value of $20,300 at the end of the lease. However, Carla Vista believes it is probable that the expected residual value at the end of the lease term will be $10,150. The equipment has a useful life of 5 years.

Prepare Carla Vista's December 31, 2024, journal entries, assuming the implicit rate of the lease is 10% and this is known to Carla Vista.

December 31, 2024 Debit Credit

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(To record the lease liability)

December 31, 2024 Debit Credit

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(To record lease payment)