Exercise 21-15 Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Sage Hill Company. The following information relates to this agreement. 1. 2. 3. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2020, is $66,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $5,000, none of which is guaranteed. The agreement requires equal annual rental payments of $21,328 to the lessor, beginning on January 1, 2020. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. Sage Hill uses the straight-line depreciation method for all equipment. 4. 5. 6. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to 0 decimal places, e.g. 5,265.) SAGE HILL COMPANY (Lessee) Lease Amortization Schedule Interest on Reduction of Lease Liability Liability Annual Lease Payment Date Lease Liability 1/1/20 $ 1/1/20 1/1/21 1/1/22 - | $ || $ Prepare all of the journal entries for the lessee for 2020 and 2021 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee's annual accounting period ends on December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to O decimal places, e.g. 5,265. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 1/1/20 Right-of-Use Asset Lease Liability (To record the lease) 1/1/20 Lease Liability Cash (To record lease payment) 12/31/20 Interest Expense Lease Liability (To record interest expense) 12/31/20 Amortization Expense Right-of-Use Asset (To record amortization of the right-of-use asset) 1/1/21 Interest Payable Interest Expense (To reverse interest expense) Interest Expense (To reverse interest expense) 1/1/20 Lease Liability Interest Expense Cash (To record lease payment) 12/31/21 Interest Expense Interest Payable (To record interest expense) 12/31/21 Amortization Expense Right-of-Use Asset (To record amortization of the right-of-use asset)