On January 1, 2024, Ricks Pawn Shop leased a truck from Corey Motors for a seven-year period with an option to extend the lease for three years. Ricks had no significant economic incentive as of the beginning of the lease to exercise the three-year extension option. Annual lease payments are $19,500 due on December 31 of each year, calculated by the lessor using a 6% interest rate. The agreement is considered an operating lease.

Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Required:

1.Prepare Ricks journal entry to record for the right-of-use asset and lease liability on January 1, 2024.

2.Prepare the journal entries to record interest and amortization on December 31, 2024.