Diego Leasing Company agrees to provide La Jolla Company with equipment under a noncancelable lease for $5$ years. The equipment has a $5-$year life, cost Diego $$25,000,$ and will have no residual value when the lease term ends. The fair value of the equipment is $$30,000.$ La Jolla agrees to pay all executory costs $($$$500$ per year$)$ throughout the lease period directly to a third party. On January $1,2019,$ the equipment is delivered. Diego expects a $14\%$ return on its net investment. The five equal annual rents are payable in advance starting January $1,2019.$

Required:

$1.$ Assuming this is a sales$-$type lease for the Diego and a finance lease for the La Jolla, prepare a table summarizing the lease and interest payments suitable for use by either party.

$2.$ Next Level On the assumption that both companies adjust and close books each December $31,$ prepare journal entries relating to the lease for both companies through December $31,2020,$ based on data derived in the table. Assume that La Jolla depreciates similar equipment by the straight$-$line method.