Keller Corporation (the lessee) entered into a general equipment lease with Dallo Company (the lessor) on January 1 of Year 1. The following information pertains to this lease agreement:

1. The equipment reverts back to the lessor at the end of the lease, and there is no bargain purchase option.

2. The lease term is 8 years and requires annual payments of $10,000 at the beginning of each year.

3. The fair value of the equipment at lease inception is $100,000. Assume that the present value of lease payments discounted at a 10% interest rate is $58,684.19.

4. The equipment has an estimated economic life of 20 years and has zero residual value at the end of this time.

Required: Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease. Journal entry should show everything beginning on January 1 of year 1 through December 31 of year 1. Include the transfer of the lease from the beginning. (There is no rental expense)