Flounder Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $43,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Flounder's incremental borrowing rate is 9%. Flounder is unaware of the rate being used by the lessor. At the end of the lease, Flounder has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Flounder uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. (a) Prepare the journal entries, that Flounder should record on December 31, 2020. (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 present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to O decimal places, e.g. 58,971.) Date Account Titles and Explanation December 31, 2020 (To record leased asset and related liability.) (To record the first rental payment.) eTextbook and Media List of Accounts Save for Later Debit Credit Attempts: 0 of 5 used Submit Answer