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CASH, INITIAL DIRECT COST, INVENTORY, PREPAID MAINTENANCE EXPENSE, EQUIPMENT, ACCUMULATED DEPRECIATION, LEASE RECEIVABLE, RIGHT-OF-USE ASSET, ACCRUED LEGAL EXPENSE, DEFERRED LEASE REVENUE, DEPOSIT LIABILITY, LEASE INCENTIVE PAYABLE, LEASE LIABILITY, SALES REVENUE, INTEREST REVENUE, LEASE REVENUE, COST OF GOODS SOLD, AMORTIZATION EXPENSE, INTEREST EXPENSE, LEASE EXPENSE, LOSS ON LEASE, SELLING EXPENSE

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Reporting Finance Lease, Guaranteed Residual-Lessee On the first day of its accounting year, January 1, 2020, Lessee Inc. leased a building at an annual payment of $138,848 to be paid at the beginning of each year for 10 years. The first payment was paid immediately. The building, which is new, cost $1,100,000 and has an estimated useful life of 12 years. The lessor's implicit rate is 6% and is known to Lessee Inc. The residual value of the building of $30,000 was guaranteed by Lessee Inc. who expects the residual value to approximate $20,000. Lessee Inc. incurred the following additional costs and received the following incentives pertaining to this lease: 0 Paid legal fees of $1,000 related to the execution of the lease. O Paid a fixed lease payment of $138,848 plus a $3,500 recurring payment to the lessor for hazard insurance on the building. O Received a lease incentive of $1,500 to sign the lease. d. Prepare the entries for Lessee Inc. for years 2020 and 2021. Assume legal fees were paid and the lease incentive was received in 2019. Note: Round your answers to the nearest whole dollar. Account Name Dr. Jan. 1, 2020 Lease Incentive Payable Date Cr. Initial Direct Cost To record lease liability and right-of-use asset Jan. 1. 2020 To record lease payment Dec. 31, 2020 To record interest Dec. 31, 2020 + To record amortization Jan. 1, 2021 To record lease payment Dec. 31, 2021 To record interest Dec. 31, 2021 To record amortization Reporting Finance Lease, Guaranteed Residual-Lessee On the first day of its accounting year, January 1, 2020, Lessee Inc. leased a building at an annual payment of $138,848 to be paid at the beginning of each year for 10 years. The first payment was paid immediately. The building, which is new, cost $1,100,000 and has an estimated useful life of 12 years. The lessor's implicit rate is 6% and is known to Lessee Inc. The residual value of the building of $30,000 was guaranteed by Lessee Inc. who expects the residual value to approximate $20,000. Lessee Inc. incurred the following additional costs and received the following incentives pertaining to this lease: 0 Paid legal fees of $1,000 related to the execution of the lease. O Paid a fixed lease payment of $138,848 plus a $3,500 recurring payment to the lessor for hazard insurance on the building. O Received a lease incentive of $1,500 to sign the lease. d. Prepare the entries for Lessee Inc. for years 2020 and 2021. Assume legal fees were paid and the lease incentive was received in 2019. Note: Round your answers to the nearest whole dollar. Account Name Dr. Jan. 1, 2020 Lease Incentive Payable Date Cr. Initial Direct Cost To record lease liability and right-of-use asset Jan. 1. 2020 To record lease payment Dec. 31, 2020 To record interest Dec. 31, 2020 + To record amortization Jan. 1, 2021 To record lease payment Dec. 31, 2021 To record interest Dec. 31, 2021 To record amortization