On January 1, 2020, Sunland Ltd. entered into an agreement to lease a truck from Ayayai Ltd. Both Sunland and Ayayai use IFRS 16. The details of the agreement are as follows: Carrying value of truck for Ayayai Ltd. Fair value of truck Economic life of truck Lease term Rental payments (at beginning of each month) $22,785 $22,785 5 years 3 years $685 Executory costs included in rental payments each month for insurance $15 Incremental borrowing rate for Sunland Ltd. 12% Sunland Ltd. expects to pay Ayayai Ltd. $3,450 under a residual value guarantee for the truck. Additional information: 1. There are no abnormal risks associated with the collection of lease payments from Sunland. 2. There are no additional unreimbursable costs to be incurred by Ayayai in connection with the leased truck. 3. At the end of the lease term, Ayayai sold the truck to a third party for $3,100, which was the truck's fair value at December 31, 2022. Sunland paid Ayayai the difference between the guaranteed residual value of $3,450 and the proceeds obtained on the resale. 4. Sunland knows the interest rate that is implicit in the lease. 5. Sunland knows the amount of executory costs included in the minimum lease payments. 6. Sunland uses straight-line depreciation for its trucks with the residual value guarantee of $3,450 for the leased truck. Your answer is partially correct. Prepare the journal entries that Ayayai would make on January 1, 2020, and the adjusting journal entries at December 31, 2020, to record the annual interest income from the lease arrangement, assuming that Ayayai has a December 31 fiscal year end. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to O decimal places, e.g. 5,275.) Date Account Titles and Explanation Jan. 1, Equipment under Lease 2020 Debit 20440 Credit Your answer is partially correct. Prepare the journal entries that Ayayai would make on January 1, 2020, and the adjusting journal entries at December 31, 2020, to record the annual interest income from the lease arrangement, assuming that Ayayai has a December 31 fiscal year end. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to O decimal places, e.g. 5,275.) Date Account Titles and Explanation Jan. 1, Equipment under Lease 2020 lease Obligations under Lease Insurance Expense Cash Dec. 31, Interest Expense 2020 Interest Payable (To record interest.) eTextbook and Media List of Accounts Debit 20440 1897 Credit 685 1897