On January 1, 2021, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a three-year period ending December 31, 2024, at which time possession of the leased asset will revert back to Aqua. The equipment cost Aqua $426,783 and has an expected economic life of four years. Aqua expects the residual value at December 31, 2024, to be $63,000. Negotiations led to Maywood guaranteeing a $89,500 residual value.

Equal payments under the lease are $126,000 and are due on December 31 of each year with the first payment being made on December 31, 2021. Maywood is aware that Aqua used a 7% interest rate when calculating lease payments.

Required:

1. Prepare the appropriate entries for Maywood for year 2021 and 2022 related to the lease.(Round your final answers to the nearest whole dollar.)