$($To record lease liability$)$

$($To record lease payment$)$

Accumulated Depreciation$-$Leased EquipmentKingston Corporation leases equipment from Falls Company on January $1,2025.$ The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers $3$ years of the equipment$$s $8-$year useful life, and the present value of the lease payments is less than $90\%$ of the fair value of the asset leased.

Prepare Kingston$$s journal entries on January $1,2025,$ and December $31,2025.$ Assume the annual lease payment is $$35,000$ at the beginning of each year, and Kingston$$s incremental borrowing rate is $4\%,$ which is the same as the lessor$$s implicit rate.