On January 1, 2018, Karrier Company leased a truck from Allied Industries for a four-year period with an option to extend the lease for three years. These estimated economic life of the truck is eight years. Karrier had no significant economic incentive as of the beginning of the lease to exercise the 3-year extension option. Annual lease payments are 30,000 due on December 31 of each year, January 1, 2019, Karrier had made significant improvements to the truck whose cost could be recovered only if it exercises the extension option, creating an expectation that extension of the lease was reasonably certain. The relevant interest rate at that time was 8%.

1. Prepare the appropriate journal entries for the lessee in January 1, 2018.

2. Prepare the appropriate journal entries for the lessee in December 31, 2018.

3. Prepare the appropriate journal entries for the lessee in January 1, 2019.

4. Prepare the appropriate journal entries for the lessee in December 31, 2019.