On January 1, 2016, NRC Credit Corporation leased equipment to Brand Services under a direct financing lease designed to earn NRC a 11% rate of return for providing long-term financing. The lease agreement specified a. Ten annual payments of $66,000 (including executory costs) beginning January 1, 2016, the inception of the lease and each December 31 thereafter through 2024 b. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $398,760 C. The lease qualifies as a capital lease to Brand d. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $5,000 per year are specified, beginning January 1, 2016. NRC was to pay this executory cost as incurred, but lease payments reflect this expenditure e. A partial amortization schedule, appropriate for both the lessee and lessor, follows Effective Interest (11% x Outstanding balance) Decrease in Outstanding Payments Balance Balance 398,760 61,000 337,760 23,846 313,914 26,469 287,445 61,000 12/31/16 61,000 0.11 (337,760) 37,154 12/31/17 61,000 0.11 (313,914) 34,531 Required Prepare the appropriate entries for both the lessee and lessor to record (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 1. The lease at its inception 2. The second lease payment and depreciation (straight line) on December 31, 2016