On January 1, 2021, Osiris Inc. leased manufacturing equipment from Giza Leasing for a four-year period ending December 31, 2021, at which time possession of the leased asset will revert back to Giza. The equipment cost Giza $206,092 and has an expected economic life of five years. Giza expects the residual value at December 31, 2021, to be $25,000. Negotiations led to Osiris guaranteeing a $35,000 residual value.

Equal payments under the lease are $50,000 and are due on December 31 of each year with the first payment being made on December 31, 2021. Osiris is aware that Giza used a 5% interest rate when calculating lease payments.

Required:

Round your answers to the nearest whole dollar amounts.

1.Prepare the appropriate journal entry for Osiris on January 1, 2021, to record the lease.

2.Prepare all appropriate journal entries for Osiris on December 31, 2021, related to the lease.