On December 31, 2024, Splish Brothers Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Splish Brothers to make annual payments of $8,148 at the beginning of each year, starting December 31, 2024. The machine has an estimated useful life of 6 years and a $5,500 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Splish Brothers uses the straight-line method of depreciation for all of its plant assets. Splish Brothers's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown. Click here to view factor tables. Account Titles and Explanation Right-of-Use Asset Lease Liability (To record the lease) Lease Liability Cash (To record first lease payment) Amortization Expense Right-of-Use Asset (To record amortization of the right-of-use asset) Lease Liability Interest Expense Cash Debit Credit (To record lease payment)