Kingbird Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $61,020 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%; Kingbirds incremental borrowing rate is 9%. Kingbird is unaware of the rate being used by the lessor. At the end of the lease, Kingbird 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. Kingbird uses the straight-line method of depreciation on similar owned equipment.

(c)

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Prepare the journal entries, that Kingbird should record on December 31, 2022. (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 0 for the amounts. Round answers to 0 decimal places e.g. 58,971.)

Date	Account Titles and Explanation	Debit	Credit
December 31, 2022
	(To record annual amortization on leased assets.)
	(To record annual payment on lease liability.)