The Baltimore, Inc. entered into a 5 year lease with the Waugh Chapel Company on January 1, 2016. Baltimore, the lessor, requires 5 annual payments of $25,000 to be made at the beginning of each year. The first payment will be received by Baltimore, Inc. on January 1, 2016. The cost of the leased property is $95,000. The selling price (market value) of the leased property is $109,680. The implicit interest rate is 7%.

Prepare the 2 necessary journal entries for January 1, 2016: 1) To record the removal of the asset, etc. 2) To record the receipt of the first lease payment of $25,000.