Goring Dairy leases its milking equipment from King Finance Company under the following lease terms.

1. The lease term is 10 years, noncancelable, and requires equal rental payments of $30,300 due at the beginning of each year starting January 1, 2020.

2. The equipment has a fair value at the commencement of the lease (January 1, 2020) of $242,741 and a cost of $180,000 on King Finances books. It also has an estimated economic life of 15 years and an expected residual value of $45,000, though Goring Dairy has guaranteed a residual value of $50,000 to King Finance.

3. The lease contains no renewal options, and the equipment reverts to King Finance upon termination of the lease. The equipment is not of a specialized use.

4. Goring Dairys incremental borrowing

rate is 8% per year. The implicit rate is also 8%.

5. Goring Dairy depreciates similar equipment that it owns on a straight-line basis.

6. Collectibility of the payments is probable.

Prepare the journal entries for the lessee and lessor at January 1, 2020, and December 31, 2020 (the lessees and lessors year-end). Assume no reversing entries.

Account Tities and explanation Debit Credit Credit Less hohe Auset 242741 Lease Liability 242741 (To record the lease.) Leade Lubility 30,300 Cash 30.300 (To record lease payment.) Lessor 180000 Lease Receivable 180000 Gain on Disposal of Equipment 6276 Gain on Discosal of Ecoment (To record the lease) Lessee: 30300 020 Lease Receivable 150000 Interest Receivable (To record interest.) 16995 Lease Receivable 16995 Interest Receivable (To record amortization.) Lessor 16995 020 Lease Receivable 16995 Interest Revenue