On January $1,2025,$ Sunland Company leased equipment to Carla Vista Corporation. The following information pertains to this lease.

The term of the non$-$cancelable lease is $6$ years. At the end of the lease term, Carla Vista has the option to purchase the

equipment for $$2,000,$ while the expected residual value at the end of the lease is $$6,000.$

Equal rental payments are due on January $1$ of each year, beginning in $2025.$

The fair value of the equipment on January $1,2025,$ is $$200,000,$ and its cost is $$150,000.$

The equipment has an economic life of $8$ years. Carla Vista depreciates all of its equipment on a straight$-$line basis.

Sunland set the annual rental to ensure a $4\%$ rate of return. Carla Vista's incremental borrowing rate is $5\%,$ and the implicit

rate of the lessor is unknown.

Collectibility of lease payments by the lessor is probable.

Both the lessor and the lessee's accounting periods end on December $31.$

Click here to view factor tables.

$($For calculation purposes, use $5$ decimal places as displayed in the factor table provided.$)$

Prepare all the necessary journal entries for Sunland for $2025.($List all debit entries before credit entries. 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 $0$ for the amounts. Round answers to $0$ decimal places, e$.$g$.5,275.$ Record journal entries in the order presented in the problem.$)$

Date

$\frac{1}{1}\frac{?}{25}$

$\frac{1}{1}\frac{?}{25}$

Account Titles and Explanation

Right$-$of$-$Use Asset

Lease Liability

Lease Liability

Lease Liability

$36426$

$36426$

$($To record the lease$)$

$($To record lease payment$)$

Debit

Credit

Fair Value of Leased Asset: $$200,000$

Less: Present value of bargain$-$purchase option $$1,581$

$($$$2000$ x $0\mathrm{.}79031)$

PV of lease payments: $$198,419$

Six annual lease payments: $$198,419/5\mathrm{.}45182=$ $$36,395$