On January 1, 2021, Allied Industries leased a high-performance conveyer to Karrier Company for a four-year period ending December 31, 2024, at which time possession of the leased asset will revert back to Allied. The equipment cost Allied $958,400 and has an expected useful life of five years. Allied expects the residual value at December 31,2024 , will be $302,400. Negotiations led to the lessee guaranteeing a $342,400 residual value. Equal payments under the finance/sales-type lease are $202,400 and are due on December 31 of each year with the first payment being made on December 31, 2021, Karrier is aware that Allied used a 5% interest rate when calculating lease payments. (EV of $1, PV of \$1. EVA of \$1. PVA of \$1. EVAD of \$1 and PVAD of \$1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the appropriate entries for both Karrier and Allied on January 1, 2021, to record the lease. 2. Prepare all appropriate entries for both Karrier and Allied on December 31,2021 , related to the lease