On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions:

The lease is noncancelable and has a term of 8 years.

The annual rentals are $30,400, payable at the beginning of each year.

The interest rate implicit in the lease is 12%.

Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for $1 at the end of the lease term, December 31, 2026.

The cost of the equipment to the lessor is $145,500, and the fair value is approximately $169,100. Ballieu incurs no material initial direct costs. It is probable that Ballieu will collect the lease payments.

Ballieu estimates that the fair value is expected to be significantly greater than $1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of $30,400 discounted at 12% is $169,138.21 (the $1 purchase option is ignored as immaterial).

Required: 1. Prepare all the journal entries for Ballieu for the years 2019 and 2020.

CHART OF ACCOUNTS

Ballieu Company

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
122	Lease Receivable
123	Equipment Leased to Others
141	Inventory
152	Prepaid Insurance
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Interest
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue
433	Interest Income

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense