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On January 1, 2020, Sheridan Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $3,000, while the expected residual value at the end of the lease is $7,000. 2. Equal rental payments are due on January 1 of each year, beginning in 2020. 3. The fair value of the equipment on January 1, 2020, is $170,000, and its cost is $90,000. 4. The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis. 5. Sheridan set the annual rental to ensure a 6% rate of return. Flynn's incremental borrowing rate is 8%, and the implicit rate of the lessor is unknown. 6. Collectibility of lease payments by the lessor is probable. Both the lessor and the lessee's accounting periods end on December 31. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Prepare all the necessary journal entries for Flynn for 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 1/1/20 Right-of-Use Asset 170001 Lease Liability 17000 (To record the lease) 1/1/20 Lease Liability 32209 Cash 3220 (To record the lease payment) 12/31/20 Amortization Expense 21250 Right-of-Use Asset 2125 (To record amortization of the right-of-use asset) 12/31/20 Interest Expense MI 11023 Lease Liability 1102 (To record interest expense)