Exercise 21-21 a-d (Part Level Submission) Rauch Incorporated leases a piece of equipment to Donahue Corporation on January 1, 2020. The lease agreement called for annual rental payments of $4,892 at the beginning of each year of the 4-year lease. The equipment has an economic useful life of 6 years, a fair value of $25,000, a book value of $20,000, and both parties expect a residual value of $8,250 at the end of the lease term, though this amount is not guaranteed. Rauch set the lease payments with the intent of earning a 5% return, and Donahue is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.

Your answer is partially correct. Try again. Suppose Donahue incurs initial direct costs of $750 related to the lease. Prepare the journal entries for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 1/1/20 ATRight-of-Use Asset 6542 Loss on Capital Lease 750 Cash 4892 (To record the lease) 1/1/20 A TLease Liability 4892 cash . Cash 4892 (To record lease payment) 12/31/20 9 Lease Expense C 4892 Right-of-Use Asset 4226 T Lease Liability 666 Click if you would like to Show Work for this question: Open Show Work