Oscar, Inc., leased equipment from Reynolds Company on January 1, 2023. Reynolds manufactured the equipment at a cost of $200,000. The equipment has a fair value of $260,000. Information related to the lease appears below: Lease term 5 years First lease payment January 1, 2023 Subsequent lease payments December 31, 2023, 2024, 2025, 2026 Economic life of the equipment 6 years Estimated value of equipment at end of economic life $0 Purchase option, reasonably expected to be exercised by Oscar $20,000 Implicit and incremental borrowing rate 8%

6. Prepare all required journal entries for Oscar and Reynolds on December 31, 2027, the end of the lease term