On January 1, 2019, XYZ Inc, leased equipment by signing a 6-year noncancelable lease that is appropriately classified as a finance lease. Information regarding the lease is as follows:

• Fair value of leased equipment $ 855,233
• Annual lease payments due at the beginning of each year, starting Jan.1, 2019 $ 150,000
• Expected residual value at end of lease term $ 20,000
• Lessee guaranteed residual value at end of lease term $ 30,000
• Economic life of leased equipment 8 years
• Lessors implicit rate in the lease (not known by XYZ) 6%
• ABCs incremental borrowing rate 7%

Present value factors for n = 6 are as follows:

	i = 6%	i = 7%
present value of single sum	0.70496	0.66634
present value of ordinary annuity	4.91732	4.76654
present value of annuity due	5.21236	5.10020

REQUIRED (round amounts in journal entries to the nearest dollar):

(1) Prepare ABCs (the lessee) appropriate journal entries at Jan. 1, 2019.

(2) Prepare ABCs appropriate journal entries at Dec. 31, 2019 (the end of the fiscal year).