Reporting Finance Lease, Purchase OptionLessee

On January 1 of Year 1, lessor Marcy and lessee Lenox contract for the lease of a machine for five payments of $7,000 each. The $7,000 payments are to be paid at the end of each year beginning on December 31 of Year 1. They also agree that at the time of the fifth payment, for an added $6,000 purchase option payment, Lenox can buy the property. Lenox reasonably expects to exercise the purchase option as the amount is well under the expected fair value at that time. Lenoxs incremental borrowing rate is 6% per year and Lenox is unaware of the implicit rate of the lease. The economic life of the asset is six years.

The value of the lease liability on January 1 of Year 1 is 33970. Please complete the lease liability schedule and the journal entries in the pictures below. Please show how you calculate the values in the lease liability schedule too. Thank you!

c. Prepare a schedule of the lease liability for the first two years of the lease term. - Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. d. Prepare the entries for Lenox on (1) January 1 of Year 1, (2) December 31 of Year 1, and (3) December 31 of Year 2. - Note: Round your answers to the nearest whole dollar