On January 1 of Year 1, Cane Company signed a five-year lease contract for equipment with Abel Company. The equipment had a normal selling price of $68,750 and an estimated useful life of six years. Five annual payments of $14,769 are payable by Abel on each January 1, beginning at the lease commencement. The asset reverts to Cane at the end of the lease term. Canes implicit interest rate is 6%, which is known to Abel.

a. Prepare a schedule of the lease liability for the first two years of the lease term