Skysong, Inc. leases a piece of equipment to Bucks Company on January 1, 2020. The contract stipulates a lease term of 5 years, with equal annual rental payments of $4,523 at the end of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The asset has a fair value of $43,000, a book value of $38,000 and a useful life of 8 years. At the end of the lease term, Skysong expects the residual value of the asset to be $12,000, and this amount is guaranteed by a third party.

Assuming Skysong wants to earn a 5% return on the lease and collectibility of the lease payments is probable, record its journal entry at the commencement of the lease on January 1, 2020. (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.)

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