Waterway Corporation enters into a 5-year lease of equipment on December 31, 2019, which requires 5 annual payments of $36,000 each, beginning December 31, 2019. In addition, Waterway guarantees the lessor a residual value of $19,900 at the end of the lease. However, Waterway believes it is probable that the expected residual value at the end of the lease term will be $9,900. The equipment has a useful life of 5 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $120,000. Prepare Lost Arks 2019 and 2020 journal entries, assuming the implicit rate of the lease is 10% and this is known to Waterway. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275. Record journal entries in the order presented in the problem.)

Date Account Titles and Explanation Debit Credit Jer 31, 2019 Lease Receivable 184824 Cost of Goods Sold 120000 Sales Revenue 184824 Inventory 120000 (To record the lease) Jer 31, 2019 Cash 36000 Lease Receivable 36000 (To record receipt of lease payment) Jer 31, 2020 Cash 36000 Lease Receivable 20118 Interest Revenue 15882