Hughey Co. as lessee records a finance lease of machinery on January 1, 2021. The seven annual lease payments of $875,000 are made at the end of each year. The present value of the lease payments at 10% is $4,260,000. Hughey uses the effective-interest method of amortization and sum-of-the-years-digits depreciation (no residual value). The amortization table for 2021 and 2022 is presented below:

Annual Reduction

Lease Interest (10%) of Lease

Date Payments on Liability Liability Lease Liability

1/1/21 $4,260,000

12/31/21 $875,000 $426,000 $449,000 3,811,000

12/31/22 875,000 381,100 493,900 3,317,100

Instruction: Prepare all of Hugheys journal entries for 2021.

1/1/21		Debit	Credit
12/31/21
12/31/22