On January 1, 2020, Cullumber Company leased equipment to Flynn Corporation. The following information pertains to this lease.

1.The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $2,000, while the expected residual value at the end of the lease is $6,000.

2.Equal rental payments are due on January 1 of each year, beginning in 2020.

3.The fair value of the equipment on January 1, 2020, is $170,000, and its cost is $140,000.

4.The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis.

5.Cullumber set the annual rental to ensure a 6% rate of return. Flynn's incremental borrowing rate is 5%, and the implicit rate of the lessor is unknown.

6.Collectibility of lease payments by the lessor is probable.

Both the lessor and the lessee's accounting periods end on December 31.

(e) Your answer is partially correct. Try again. presented in the problem.) Prepare all the necessary journal entries for Flynn for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275. Record journal entries in the order Date Account Titles and Explanation Debit Credit v X 1/1/20 Right-of-Use Asset 170000 X Lease Liability 170000 (To record the lease) * 1/1/20 v ease Liability 31803 Cash 31803 (To record the lease payment) X 12/31/20 v Amortization Expense 20500 v x Right-of-Use Asset 20500 (To record amortization of the right-of-use asset) X 12/31/20 v Interest Expense 329 Lease Liability X 8292 (To record interest expense)