On January 1, 2020, Alex Company signed a 5-year lease contract for equipment with Abel Company. The equipment had a normal selling price of $110,000 and an estimated useful life of 6 years. Five annual payments of $23,630 are payable by Abel on January 1, beginning in 2020. The asset reverts to Alex at the end of the lease term, December 31, 2024, and is estimated to have an unguaranteed residual value on that date of $6,000. Alexs implicit interest rate is 6%, which is known to Abel. Abel also paid legal fees in the execution of the lease of $3,600 on January 1, 2020.

Prepare an amortization schedule of the lease liability.

c. Prepare the entries for Abel Company for 2020.