PROBLEM 1 (23 pts)

On January 1, 2021, Hooman Inc. leased equipment with a useful life of 8 years form Farhad Corp. for a six-year period. Equipment costs Farhad Inc. $150,000 and its estimated value the end of the lease period is $15,000 which is not guaranteed by Hooma (lessee). Fair market value of the equipment is $200,100. Equal annual payments under the lease are $45,000 (including 5,000 maintenance costs). Hooman inc. incurred initial direct costs of $6,000 related to this lease. The first payment is due on January 1, 2021and the remaining payments are made each December 31, beginning with December 31, 2021. Implicit rate on the lease is 10%.

REQUIRED:

Assuming that this is a Finance lease for Hooman Inc., prepare all the required journal entries for Hooman Inc. (Lessee) for 2021 and 2022.