Current Attempt Skysong Leasing Company agrees to lease equipment to Concord Corporation on January 1, 2020. The following information relates to the lease agreement. 1 The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2 The cost of the machinery is $475,000, and the fair value of the asset on January 1, 2020, is $681,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Concord estimates that the expected residual value at the end of the lease term will be 50,000. Concord amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 4. 5. The collectibility of the lease payments is probable. 6. Skysong desires a 9% rate of return op its investments. Concord's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. Prepare the journal entries Concord would make in 2020 and 2021 related to the lease arrangement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to O decimal places eg. 58,972. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation 1/1/20 12/31/20 O Right-of-Use Asset Lease Llability (To record the lease.) Lease Llability Cash (To record lease payment.) Amortization Expense Right-of-Use Asset (To record amortization.) Interest Expense Lease Llability Debit 717140 129122 102449 58802 (To record interest.) 70745 Credit 717 129 102 58 12/31/20 v 12/31/20 Lease Llability Cash (To record lease payment.) Amortization Expense Right-of-Use Asset (To record amortization.) Interest Expense Lease Llability (To record interest.) Lease Llability Interest Payable 119150 94820 54459 64691 54459 1/1/21 Amortization Expense 94820 Right-of-Use Asset (To record amortization.) Interest Expense Lease Llability (To record interest.) 47990 X Your answer is incorrect. Suppose Concord expects the residual value at the end of the lease term to be $40,000 but still guarantees a residual of $50,000. Compute the value of the lease liability at lease commencement Lease liability eTextbook and Media List of Accounts 673739