On January 1, 2018, Ricks Pawn Shop leased a truck from Chumley Motors for a five-year period with an option to extend the lease for three years. Ricks had no significant economic incentive as of the beginning of the lease to exercise the 3-year extension option. Annual lease payments are $20,000 due on December 31 of each year, calculated by the lessor using a 7% interest rate. The agreement is considered an operating lease.

Required: 1. Prepare Ricks journal entry to record for the right-of-use asset and lease liability at January 1, 2018.

Jan 01, 2018 Record the beginning of the lease for Rick's.

2. Prepare the journal entries to record interest and amortization at December 31, 2018.

Dec 31,2018 Record the lease and interest payment for Rick's.

Record the amortization of right-to-use asset for Rick's.