On January 1st, 2019, ABC Inc. (the lessor) agrees to lease a piece of specialized piece of machineryto DEF Inc. (the lessee) for 5 years. ABC Inc. is a financial intermediary specializing in leasingarrangements such as the one described below. Details are as follows:

-Fair value of machinery at inception of the lease: $100,000.

-Lease term: 5 years (no bargain renewal terms).

-5 Annual lease payments of $23,000 each are made on January 1^st of each year starting on January 1st, 2019

-Bargain purchase option at end of lease: $5,000.

-Economic life of the asset is 10 years, after which the equipment will be worthless.Straight-line depreciation applies.

ABC's implicit interest rate with respect to this lease is 10%.This rate is not known to the lessee.DEF Inc's incremental borrowing rate is 9%.

REQUIRED

Assuming that this qualifies as a right-of-use lease.

a) Create lease amortization table for the lease for DEF.

b) create all entries that DEF will record for this leased equipment in 2019 and 2020.