View Policies Show Attempt History Current Attempt in Progress Indigo Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $61,020 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Indigo's incremental borrowing rate is 9%. Indigo is unaware of the rate being used by the lessor. At the end of the lease, Indigo has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Indigo uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. Your answer is partially correct. Prepare the journal entries, that Indigo should record on December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places, e.g. 58,971) Date Account Titles and Explanation December 31.2020 Right-of-Use Asset Lease Liability (To record leased asset and related liability.) Lease Liability Cash Debit 258707 61020 Credit 258707 61020 (C) Prepare the journal entries, that Indigo should record on December 31, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to O decimal places eg. 58,971.) Date Account Titles and Explanation December 31.2022 Amortization Expense Right-of-Use Asset Debit 37423 Credit 37423 (To record annual amortization on leased assets.) To record annual payment on lease liability)