Pina Corporation leases equipment from Falls Company on January $1,2025.$ The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers $3$ years of the equipment's $8-$year useful life, and the present value of the lease payments is less than $90\%$ of the fair value of the asset leased.

Prepare Pina's journal entries on January $1,2025,$ and December $31,2025.$ Assume the annual lease payment is $$37,000$ at the beginning of each year, and Pina's incremental borrowing rate is $8\%,$ which is the same as the lessor's implicit rate. $($List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use $5.$ decimal places as displayed in the factor table provided and round final answers to $0$ decimal places, e$.$g$.5,265.$ If no entry is required, select $"$No Entry" for the account titles and enter $O$ for the amounts. Record journal entries in the order presented in the problem.$)$

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Account Titles and Explanation

Debit

Credit

Right$-$of$-$Use Asset $$

$$

$$

$$

$$

$($To record lease liability$)$

Pina Corporation leases equipment from Falls Company on January $1,2025.$ The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers $3$ years of the equipment's $8-$year useful life, and the present value of the lease payments is less than $90\%$ of the fair value of the asset leased.

Prepare Pina's journal entries on January $1,2025,$ and December $31,2025.$ Assume the annual lease payment is $$37,000$ at the beginning of each year, and Pina's incremental borrowing rate is $8\%,$ which is the same as the lessor's implicit rate. $($List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use $5$ decimal places as displayed in the factor table provided and round final answers to $0$ decimal places, e$.$g$.5,265.$ If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts. Record journal entries in the order presented in the problem.$)$

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Date

Account Titles and Explanation

Debit

Credit

Right$-$of$-$Use Asset

Lease Liability