Sunland Company, a machinery dealer, leased a machine to Carla Vista Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $34,300 at the beginning of each year. The first payment is received on January 1, 2025 . Sunland had purchased the machine during 2024 for $140,000. Collectibility of lease payments by Sunland is probable. Sunland set the annual rental to ensure a 8% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sunland at the termination of the lease. Assume that Carla Vista Corporation does not know the rate implicit in the lease used by Sunland, and Carla Vista's incremental borrowing rate is 10%. In addition, assume that Carla Vista incurs initial direct costs of $16,000. Click here to view factor tables. Date Account Titles and Explanation Debit Credit 1/1/25 (To record the lease) 1/1/25 Lease Liability Cash (To record the first lease payment) 12/31/25 Interest Expense Cash (To record interest expense) 12/31/25 Amortization Expense Right-of-Use Asset (To record amortization of the right-of-use asset) Sunland Company, a machinery dealer, leased a machine to Carla Vista Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $34,300 at the beginning of each year. The first payment is received on January 1, 2025 . Sunland had purchased the machine during 2024 for $140,000. Collectibility of lease payments by Sunland is probable. Sunland set the annual rental to ensure a 8% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sunland at the termination of the lease. Assume that Carla Vista Corporation does not know the rate implicit in the lease used by Sunland, and Carla Vista's incremental borrowing rate is 10%. In addition, assume that Carla Vista incurs initial direct costs of $16,000. Click here to view factor tables. Date Account Titles and Explanation Debit Credit 1/1/25 (To record the lease) 1/1/25 Lease Liability Cash (To record the first lease payment) 12/31/25 Interest Expense Cash (To record interest expense) 12/31/25 Amortization Expense Right-of-Use Asset (To record amortization of the right-of-use asset)