Q.2 Pie Company signed a non-cancelable lease contract and leased a construction machine on October 1, 2019 for 4 years. According to the terms of the agreement, the payments would be yearly. Rose Company will pay $ 30,000 starting from October 1, 2020. The interest rate of the agreement is 5% per year. If Rose Company wants to purchase it, it would purchase this machine for $ 6,000 (bargain purchase option) at the end of the lease agreement. Rose Company plans to use the bargain purchase option at the end of the lease agreement. The useful life is estimated as 6 years. The residual value is estimated as zero at the end of its useful life. Straight-line method of depreciation is utilized. The amortization table for the lease contract is below.

Dates	Lease Liability (Beginning)	Payment	Interest	Principle	Lease Liability (Ending)
Oct. 1, 2019	111,316	-	-	-	111,316
Oct. 1, 2020	111,316	30,000	5,566	24,434	86,882
Oct. 1, 2021	86,882	30,000	4,344	25,656	61,226
Oct. 1, 2022	61,226	30,000	3,061	26,939	34,287
Oct. 1, 2023	34,287	36,000	1,713	34,287	0

Required:

a. Prepare the journal entries at the dates of October 1, 2019, December 31, 2019 and October 1, 2020.

b. Prepare the partially Balance Sheet as of December 31, 2019 and Income Statements for the year 2019.