On January $1,$ Harbor $($lessee$)$ signs a five$-$year lease for equipment that is accounted for as a finance lease. The lease requires five $$31,000$ lease payments $($the first at the beginning of the lease and the remaining four at December $31$ of years $1,2,3,$ and $4),$ and the present value of the five annual lease payments is $$133,676,$ based on an $8\%$ interest rate.

Prepare the January $1$ journal entry Harbor records at inception of the lease for any asset or liability.

Prepare the January $1$ entry. Harbor records for the first $$31,000$ cash lease payment.

If the leased asset has a five$-$year useful life with no salvage value, prepare the December $31$ journal entry Harbor records each year for amortization of the leased asset.

Journal entry worksheet

$1$

$2$

$3$

Record the right$-$of$-$use lease asset.

Note: Enter debits before credits.

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