1. On January 1, 2020 we a sign lease agreement. It calls for annual rental payments of $1,137 at the beginning of each year of the 3-year lease beginning on 1/1/20. The equipment has an economic useful life of 7 years; a fair value of $7,000; a book value of $5,000. The lessor expects a residual value of $4,500 at the end of the lease term. We have an incremental borrowing rate of 8%. There is no bargain purchase option. Ownership of the lease does not transfer at the end of the lease term. This is an operating lease.

Required: Prepare the amortization table and the journal entries for Lessor and Lessee