Cullumber Company on January 1, 2021, enters into a 9-year noncancelable lease for equipment having an estimated useful life of 10 years and a fair value to the lessor, Daly Corp., at the inception of the lease of $3,960,000. Cullumber's incremental borrowing rate is 8%. Cullumber uses the straight-line method to depreciate its assets. The lease contains the following provisions:

1.		Rental payments of $268,000 for property taxes, payable at the beginning of each six-month period.
2.		An option allowing the lessor to extend the lease one year beyond the lease term.
3.		A guarantee by Cullumber Company that Daly Corp. will realize $225,000 from selling the asset at the expiration of the lease. However, the actual residual value is expected to be $143,000.

January 1, 2021 Right-of-Use Asset 3839012 Lease Liability (To record lease) January 1, 2021 Lease Liability 268000 Cash (To record first lease payment) December 31, 2021 V Lease Liability 124795 Insurance Expense December 31, 2021 Lease Liability 124795 Insurance Expense Cash (To record amortization) (To record interest payment)