On $1/1,$ Year $1,$ a lessee engages in a finance lease with a lessor who accounts for the lease as sales$-$type lease. The lease is an annuity due lease for $10$ years. The annual lease payments are $$20,000.$ The first annual lease payment of $$20,000$ is on $1/1,$ Year $1,$ and the remaining payments are on $12/31($i$.$e$.,$ the second annual lease payment is on $12/31,$ Year $1.)$ There is $$8,000$ guaranteed residual value. The interest rate implicit in the lease, which the lessee is aware of is $8\%,$ thus a present value factor of an annuity due of $7\mathrm{.}2469$ and the present value of a single sum $0\mathrm{.}4631.$

The fair market value and cash selling price of the equipment is $$148,643,$ which is also the present value of the minimum lease payments for the lessee and the net investment for the lessor. The inventory carrying value of the equipment on the lessor$$s books is $$70,000.$ Round to the nearest whole dollar.

Prepare the amortization table shown below for the first three years of the lease and the journal entries for the lessee and lessor on the following pages for the dates indicated.