Martinez Corporation leases equipment from Falls Company on January $1,2025.$ The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers $3$ years of the equipment's $8-$year useful life, and the present value of the lease payments is less than $90\%$ of the fair value of the asset leased.

Prepare Martinez's journal entries on January $1,2025,$ and December $31,2025.$ Assume the annual lease payment is $$32,000$ at the beginning of each year, and Martinez's incremental borrowing rate is $5\%,$ which is the same as the lessor's implicit rate. $($List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use $S$ decimal places as displayed in the factor table provided and round final answers to O decimal places, eg$.5,265.$ If no entry is required, select $"$No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.$)$

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Date

$\frac{1}{1}\frac{?}{25}q,$

$\frac{1}{1}\frac{?}{25}q,$

$\frac{12}{31}\frac{?}{25}$

Account Titles and Explanation

Right$-$of$-$Use Asset

Lease Liability

$($To record lease liability$)$

Lease Liability

Cash

$($To record lease payment$)$

$$

Debit

$87144$

$$

$$

$32000$

Credit

$$

$$

$$

$$

$$

$$