Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Novak 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. The fair value of the asset at January 1, 2020, is $70,000.

3. 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 $7,000, none of which is guaranteed.

4. The agreement requires equal annual rental payments of $21,827.58 to the lessor, beginning on January 1, 2020.

5. The lessees incremental borrowing rate is 4%. The lessors implicit rate is 3% and is unknown to the lessee.

6. Novak uses the straight-line depreciation method for all equipment.

Prepare all of the journal entries for the lessee for 2020 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessees annual accounting period ends on December 31. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round answersto 2 decimal places, e.g. 5,265.25. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entriesin the order presented in the problem.)

\begin{tabular}{cl} Date & Account Titles and Explanation \\ \hline 1/1/20 Leased Equipment \\ \hline \end{tabular} \begin{tabular}{|l||} \hline 63594 \\ \hline \hline \end{tabular} Lease Liability (To record the lease) 1/1/20v Lease Liability 21828 (To record lease liability) 12/31/20 Interest Expense 1671 21828 Cash Lease Liability Cash