Rodriguez Leasing leased equipment to Donahue Company on January 1, 2021. The lease payments were calculated to provide the lessor a 10% return. Ten annual lease payments of $75,000 are due at the beginning of each year beginning January 1, 2021.

Required: Consider this to be a finance lease. Prepare the journal entries to record the lease by Donahue (lessee) at:

1. January 1, 2021.

2. December 31, 2021, the end of the first reporting period.

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