On December 31, 2019, Mandolini Corp. (Mandolini), a publicly accountable entity, leased a small research submarine from Kelly Shipyards Inc. (KSI). The lease is for a period of eight years. The submarine has an economic life of 12 years. The submarines fair value at the start of the lease was $950,000, and it will have a residual value of $250,000 at the end of the lease period. The residual value is guaranteed by Mandolini. Mandolinis management estimates that they will return the submarine to KSI at a fair value of $200,000. The annual lease payment (6% implicit rate of return, which is known to Mandolini) is $135,495. Each lease payment includes $15,000 related to the annual maintenance of the submarine. The first lease payment was made by Mandolini on December 31, 2019. Mandolinis incremental borrowing rate is 5%, and Mandolinis controller has determined that this lease should be accounted for as a finance lease.

Required: Prepare the journal entries that Mandolini should record related to this lease on the following dates: a) December 31, 2019 b) December 31, 2020 c) December 31, 2027, assuming that the submarine is returned on this date and the fair value is assessed at $220,000