LeBron James $($LBJ$)$ Corporation agrees on January $1,2025,$ to lease equipment from Sheridan, Inc. for $3$ years. The lease calls for annual lease payments of $$25,000$ at the beginning of each year. The lease does not transfer ownership, nor does it contain a bargain purchase option, and is not a specialized asset. In addition, the useful life of the equipment is $10$ years, and the present value of the lease payments is less than $90\%$ of the fair value of the equipment.

Prepare LBJ$\text{'}$s journal entries on January $1,2025($commencement of the operating lease$),$ and on December $31,2025.$ Assume the implicit rate used by the lessor is unknown, and LBJ$\text{'}$s incremental borrowing rate is $6\%.($Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select $"$No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. For calculation purposes, use $5$ decimal places as displayed in the factor table provided and round final answers to $0$ decimal places, eg$.5,275.$ Record journal entries in the order presented in the problem.$)$

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Account Titles and Explanation

Debit

Credit

$($To record lease liability$)$

$($To record lease payment$)$