Coronado Steel Company, as lessee, signed a lease agreement for equipment for $5$ years, beginning December $31,2025.$ Annual rental payments of $$42,000$ 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 $4\%$; Coronado's incremental borrowing rate is $6\%.$ Coronado is unaware of the rate being used by the lessor.

At the end of the lease, Coronado 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. Coronado uses the straight$-$line method of depreciation on similar owned equipment.

A$.$ Prepare the journal entries, that Coronado should record on December $31,2025$

DEBIT: Right$-$of$-$Use Asset$-191,271$

CREDIT: Lease Liability$-191,271$

DEBIT: Lease Liability$-42,000$

CREDIT: Cash$-42,000$

B$.$ Prepare the journal entries, that Coronado should record on December $31,2026$

DEBIT: Amortization Expense$-$

CREDIT: Right$-$of$-$Use Asset$-$

DEBIT: Interest Expense$-$

DEBIT: Lease Liability$-$

CREDIT: Cash$-$

C$.$ Prepare the journal entries, that Coronado should record on December $31,2027$

DEBIT: Amortization Expense$-$

CREDIT: Right$-$of$-$Use Asset$-$

DEBIT: Interest Expense$-$

DEBIT: Lease Liability$-$

CREDIT: Cash$-$

D$.$ What amounts would appear on Coronado$$s December $31,2027,$ balance sheet relative to the lease arrangement?