Lessee Company enters into a 6-year finance lease of non-specialized equipment with Lessor Company on January 1, 2020. Lessee has agreed to pay $39,200 annually beginning immediately on January 1, 2020. The lease includes an option for the lessee to purchase the equipment at $4,200, which is $2,800 below the estimated fair value at lease end. Lessee Company is reasonably certain that it will exercise the purchase option. The economic life of the asset is 7 years. The lessee's incremental borrowing rate is 7% and the lessor's implicit rate is not readily determinable by the lessee. Record Lessee Company's journal entries on (a) January 1, 2020, and (b) December 31, 2020, assuming that the lease is properly classified as a finance lease. Dr. 0 39,200 0 39,200 Date Account Name a. Jan. 1, 2020 Right-of-Use Asset Lease Liability To record asset and liability Jan. 1, 2020 Lease Liability Cash To record cash lease payment b. Dec 31, 2020 Interest Expense Lease Liability To record interest Dec 31, 2020 Amortization Expense Right-of-Use Asset To record amortization 0 0 Lessee Company enters into a 6-year finance lease of non-specialized equipment with Lessor Company on January 1, 2020. Lessee has agreed to pay $39,200 annually beginning immediately on January 1, 2020. The lease includes an option for the lessee to purchase the equipment at $4,200, which is $2,800 below the estimated fair value at lease end. Lessee Company is reasonably certain that it will exercise the purchase option. The economic life of the asset is 7 years. The lessee's incremental borrowing rate is 7% and the lessor's implicit rate is not readily determinable by the lessee. Record Lessee Company's journal entries on (a) January 1, 2020, and (b) December 31, 2020, assuming that the lease is properly classified as a finance lease. Dr. 0 39,200 0 39,200 Date Account Name a. Jan. 1, 2020 Right-of-Use Asset Lease Liability To record asset and liability Jan. 1, 2020 Lease Liability Cash To record cash lease payment b. Dec 31, 2020 Interest Expense Lease Liability To record interest Dec 31, 2020 Amortization Expense Right-of-Use Asset To record amortization 0 0