Oakridge Leasing Corporation signs an agreement on January 1, 2020, to lease equipment to Sandhill Limited. Oakridge and Sandhill follow ASPE. The following information relates to the agreement. 1. 2. 3. 4. 5. The term of the non-cancellable lease is five years, with no renewal option. The equipment has an estimated economic life of six years. The asset's fair value at January 1, 2020, is $87,000. 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 $6,600, which is guaranteed. Sandhill Limited assumes direct responsibility for all executory costs, which include the following annual amounts: $1,000 to Rocky Mountain Insurance Ltd. for insurance and $1,670 to James Township for property taxes. The agreement requires equal annual rental payments of $20,252 to Oakridge, the lessor, beginning on January 1, 2020. 6. The lessee's incremental borrowing rate is 12%. The lessor's implicit rate is 11% and is known to the lessee. 7. Sandhill Limited uses the straight-line depreciation method for all equipment. 8. Sandhill uses reversing entries when appropriate. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. $ $ Annual Lease Payment Lease Amortization Schedule Interest on Unpaid Obligation Reduction of Lease Obligation 20252 20252 6911 20252 20252 20252 6600 $ 20252 $ Balance of Lease Obligation 0 Prepare all of Sandhill's journal entries for 2020 to record the lease agreement and the lease payments. LeBlanc's accounting period ends on December 31. Ignore payments of insurance and property taxes. (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. Round answers to O decimal places, e.g. 5,275.) Date Account Titles and Explanation 1/1/20 Right-of-Use Asset 12/31/20 Lease Liability Cash (To record inception of lease and first lease payment.) Interest Expense Lease Liability (To record interest.) Debit Credit Date Account Titles and Explanation Debit Credit 1/1/20 Right-of-Use Asset 12/31/20 Lease Liability Cash (To record inception of lease and first lease payment.) Interest Expense Lease Liability (To record interest.) Depreciation Expense Accumulated Depreciation - Right-of-Use Asset (To record depreciation expense.)