On December 31, 2019, Sage Hill Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Sage Hill to make annual payments of $8,026 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $4,900 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Sage Hill uses the straight-line method of depreciation for all of its plant assets. Sage Hills incremental borrowing rate is 9%, and the lessors implicit rate is unknown.

Prepare all necessary journal entries for Sage Hill for this lease through December 31, 2020. (Record journal entries in the order presented i the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to O decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit 12/31/19 - Leased Equipment 34028 Lease Liability 34028 (To record the lease) 12/31/19 4 Lease Liability 8026 cash 8026 (To record first lease payment) 12/31/204 Depreciation Expense 6805.6 Accumulated Depreciation-Capital Leases 6805.6 (To record amortization of the right-of-use asset) 12/31/20 Interest Expense 2340 Lease Liability 5686 cash 8026 (To record interest expense)