On January 1, 2021, Natural Textiles leased a pressing machine from Precise Machinery. The lease is for 10 years at which time Natural has an option to purchase the machine for $10,000, which is the expected residual value of the machine at the end of the lease. The machine has an estimated life of 12 years with zero residual value. The lease calls for Natural to assume all costs of ownership and to make annual payments of $100,000 due at the beginning of each year. At the end of the 2025, Natural has the option to terminate the lease without penalty, but at the inception of the lease, Natural has no intention or incentive to exercise the option. Natural uses the straight-line method of depreciation and pays 10% interest on borrowed money. Precises implicit rate is unknown. Required: Treat each of the following requirements as independent.

1. Determine the balance of Natural Textiles right-of-use asset and lease liability at the end of 2022.

2. Assume that toward the end of 2022, Natural receives news that a new model of pressing machine will be available in the market in early 2024, which will be twice as fast as Naturals current machine despite costing about the same in price. Natural plans to terminate its current lease at the end of 2025. Naturals incremental borrowing rate at the end of 2022 is 12%. What will be the balance of Natural Textiles right-of-use asset and lease liability at the end of 2022? Provide the appropriate journal entries in your response.