Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Kingbird Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. 3. The fair value of the asset at January 1, 2020, is $63,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $5,000, none of which is guaranteed. The agreement requires equal annual rental payments of $20,289 to the lessor, beginning on January 1, 2020. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. 4. 5. 6. Kingbird uses the straight-line depreciation method for all equipment. Right-of-Use Asset 58014.37 Lease Liability 58014.37 (To record the lease) Lease Liability Cash (To record lease payment) Interest Expense Lease Liability (To record interest expense) Amortization Expense Right-of-Use Asset (To record amortization of the right-of-use asset) Lease Liability Interest Expense (To reverse interest expense) Lease Liability Interest Expense Cash (To record lease payment) Interest Expense Lease Liability (To record interest expense) Amortization Expense Right-of-Use Asset (To record amortization of the right-of-use asset)