Ludwick Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $40,000 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 6%; Ludwick's incremental borrowing rate is 8%. Ludwick is unaware of the rate being used by the lessor. At the end of the lease, Ludwick 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. Ludwick uses the straight-line method of depreciation on similar owned equipment. Prepare the journal entries, that Ludwick should record on December 31, 2020. (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 o for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to o decimal places, e.g. 58,971.) Date Account Titles and Explanation Debit Credit December 31, 2020 Right-of-Use Asset 178604 Lease Liability 178604 (To record leased asset and related liability.) Lease Liability 40000 40000 Cash (To record the first rental payment.) Prepare the journal entries, that Ludwick should record on December 31, 2021. (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.) Date Account Titles and Explanation Debit Credit December 31, 2021 Amortization Expense 25515 25515 Right-of-Use Asset (To record amortization.) Interest Expense 8316 Lease Liability 31684 40000 Cash (To record annual payment on lease liability.) Prepare the journal entries, that Ludwick 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 O decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit December 31, 2022 Amortization Expense 255151 Right-of-Use Asset 25515 (To record annual amortization on leased assets.) Interest Expense 6415 Lease Liability 33585 40000 Cash (To record annual payment on lease liability.)