Skysong Corporation enters into a 7-year lease of equipment on December 31, 2024, which requires 7 annual payments of $39,300 each, beginning December 31, 2024. In addition, Skysong guarantees the lessor a residual value of $19,200 at the end of the lease. However, Skysong believes it is probable that the expected residual value at the end of the lease term will be $9,200. The equipment has a useful life of 7 years. Assume that for Lost Ark Company, the lessor, the collectibility of lease payments is probable and the carrying amount of the equipment is $170,000.

Prepare Lost Ark's 2024 and 2025 journal entries, assuming the implicit rate of the lease is 9% and this is known to Skysong.

1. To Record the Lease.
2. To Record Receipt of Lease Payment