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Sage Hill Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 4 years and requires equal rental payments of $110,441 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $390,000, an estimated useful life of 4 years, and no estimated residual value. The appropriate interest rate is 9%.

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Prepare Sage Hills 2019 and 2020 journal entries, assuming Sage Hill depreciates similar equipment it owns on a straight-line basis. (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. 5,275.)

Date

Account Titles and Explanation

Debit

Credit

12/31/1912/31/20

enter an account title To record lease liability on December 31 2019

enter a debit amount

enter a credit amount

enter an account title To record lease liability on December 31 2019

enter a debit amount

enter a credit amount

(To record lease liability)

12/31/1912/31/20

enter an account title To record lease payment on December 31 2016

enter a debit amount

enter a credit amount

enter an account title To record lease payment on December 31 2016

enter a debit amount

enter a credit amount

(To record lease payment)

12/31/1912/31/20

enter an account title To record interest expense on December 31 2020

enter a debit amount

enter a credit amount

enter an account title To record interest expense on December 31 2020

enter a debit amount

enter a credit amount

enter an account title To record interest expense on December 31 2020

enter a debit amount

enter a credit amount

(To record interest expense)