CulverCorporation ("Culver") manufactures equipment with an estimated economic life of13years. On May 30, 2020,Culverleases it to Gadget Corporation ("Gadget") for a period of10years. Assume both companies follow ASPE. Details of the lease are as follows:

Equipment has a fair value and cost at the inception of the lease: $233,755.Guaranteed residual value: $28,000.Annual lease payment, due at beginning of each year: $34,250.Lease contains no renewal options and the equipment reverts toCulverat the end of the lease.Gadget's incremental interest rate, as well as implicit rate is11%.Gadget uses straight-line amortization for similar equipment that it owns.Culverhas determined that collectibility of lease payments is reasonably predictable and that no additional costs will be incurred.

Click here to view the factor table PRESENT VALUE OF 1.

Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.

Prepare the journal entries for the lessee and lessor at May 30, 2020, and at December 31, 2020, which is the year end for both the lessee and lessor.(Credit account titles are automatically indented when the amount is entered.Do not indent manually. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Lessee:

Date

Account Titles and Explanation

Debit

Credit

May 30, 2020

Dec. 31, 2020

(To record inception of lease.)

(To record lease payment.)

May 30, 2020

Dec. 31, 2020

(To record interest.)

(To record depreciation expense.)

Lessor:

Date

Account Titles and Explanation

Debit

Credit

May 30, 2020

Dec. 31, 2020

(To record inception of lease.)

(To record collection of lease payment.)

May 30, 2020

Dec. 31, 2020

(To record interest.)

Prepare journal entries at May 30, 2021 for the lessee and lessor. Assume reversing entries are not used.(Credit account titles are automatically indented when the amount is entered.Do not indent manually. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Lessee:

Date

Account Titles and Explanation

Debit

Credit

May 30, 2021

(To record lease payment.)

Lessor:

Date

Account Titles and Explanation

Debit

Credit

May 30, 2021

(To record interest.)

(To record collection of lease payment.)