Penny manufactured a new car at a cost of $22,000 and leased it to Leonard on February 1, 2013. The lease calls for 4 equal annual payments of $6,689 on February 1st of each year including the year of lease inception. The car has a remaining useful life of 4 years and a salvage value of zero. The lease does not have a bargain purchase option. Collectibility of payments is reasonably certain. The lessor uses a rate of return of 8%. The PV factor for an annuity due for 4 periods at 8% interest is 3.57710.

Prepare the appropriate journal entries for Penny at the inception of the lease (i.e., February 1, 2013). Make sure to write Dr. or Cr. before each line, indent credits, and write amounts rounded to the nearest dollar.