The following facts pertain to a non-cancelable lease agreement between Sandhill Leasing Company and Teal Mountain Company, a lessee. Commencement date May 1, 2020 Annual lease payment due at the beginning of each year, beginning with May 1, 2020 $15,349.90 Bargain purchase option price at end of lease term $6,000 Lease term 5 years Economic life of leased equipment 10 years Lessor's cost $65,000 Fair value of asset at May 1, 2020 $76,000 Lessor's implicit rate 4 % Lessee's incremental borrowing rate 4 % The collectibility of the lease payments by Sandhill is probable. TEAL MOUNTAIN COMPANY (Lessee) Lease Amortization Schedule innual Lease Payment Plus BPO Interest on Liability Reduction of Lease Liability Lease Liability $ $ 76000 15349.90 PO 15349.90 60650.10 15349.90 2426 12923.90 47726.20 15349.90 1909.05 13440.85 34285.35 15349.90 1371.41 13978.49 20306.86 15349.90 812.27 14537.63 5769.23 6000 230.77 5769.23 82749.50 $ 6749.5 $ 76000 Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2020 and 2021. Teal Mountain's annual accounting period ends on December 31. Reversing entries are used by Teal Mountain. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 5,275.15. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 5/1/20 Leased Asset 76000 Lease Liability 76000 (To record the lease) 5/1/20 Lease Liability 15349.90 Cash 15349.90 (To record the first lease payment) 12/31/20 Interest Expense 2426 Interest Payable 2426 (To record interest expense) 12/31/20 Depreciation Expense Accumulated Depreciation-Leased Equipment (To record amortization of the right-of-use asset) 1/1/21 5/1/21 12/31/21 (To record interest expense) 12/31/21 (To record amortization of the right-of-use asset)