Hola Leasing Company agrees to lease equipment to Jubalee Corporation on January 1, 2025. The following information relates to the lease agreement.

1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.

2. The cost of the machinery is $507.000, and the fair value of the asset on January 1, 2025, is $690,000.

3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $45,000. Jubalee estimates that the expected residual value at the end of the lease term will be $45,000. Jubalee amortizes all of its leased equipment on a straight-line basis.

4. The lease agreement requires equal annual rental payments, beginning on January 1, 2025.

5. The collectibility of the lease payments is probable.

6. Hola desires a 10% rate of return on its investments. Jubalee's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown.

Annual rental payment = $124533

Pv of minimum lease payments = $651375

These answers are all correct, I just need someone to show me the work for each answer below!

a.) Prepare the journal entries Jubalee would make in 2025 and 2026 related to the lease arrangements

b.) Prepare the journal entries Hola would make in 2025 and 2026 related to the lease arrangement.

THANKS!! I will thumbs up if correct!

Date 25 (To record lease payment.) Amortization Expense Right-of-Use Asset (To record amortization.) Interest Expense Lease Liability (To record interest.) Lease Liability Cash Amortization Expense Right-of-Use Asset (To record amortization.) Interest Expense Lease Liability (To record interest.) Debit 651376 124533 124533 Date 25 (To record lease payment.) Amortization Expense Right-of-Use Asset (To record amortization.) Interest Expense Lease Liability (To record interest.) Lease Liability Cash Amortization Expense Right-of-Use Asset (To record amortization.) Interest Expense Lease Liability (To record interest.) Debit 651376 124533 124533