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The following facts pertain to a non-cancelable lease agreement between Ivanhoe Leasing Company and Metlock Company, a lessee.

Commencement date		May 1, 2020
Annual lease payment due at the beginning of
each year, beginning with May 1, 2020		$15,138.16
Bargain purchase option price at end of lease term		$4,000
Lease term		5	years
Economic life of leased equipment		10	years
Lessors cost		$50,000
Fair value of asset at May 1, 2020		$68,000
Lessors implicit rate		8	%
Lessees incremental borrowing rate		8	%

The collectibility of the lease payments by Ivanhoe is probable.

Prepare the journal entries on the lessees 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. Metlocks annual accounting period ends on December 31. Reversing entries are used by Metlock. (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.)

Debit Credit 68000 Account Titles and Explanation Right-of-Use Asset Lease Liability (To record the lease) Lease Liability 68000 15138.16 Cash 15138.16 (To record the first lease payment) Interest Expense 2819.30 2819.30 Lease Liability (To record interest expense) Amortization Expense 2819.30 2819.30 Right-of-Use Asset (To record amortization of the right-of-use asset) Lease Liability 2819.30 Interest Expense 2819.30 Interest Expense 4228.95 Lease Liability 10909.21 Cash 15138.16 Interest Expense 2237.47 2237.47 Lease Liability (To record interest expense) Amortization Expense 2819.30 2819.30 Right-of-Use Asset (To record amortization of the right-of-use asset)

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