Flint Corporation agrees on January 1, 2020, to lease equipment from Packers, Inc. for 3 years. The lease calls for annual lease payments of $13,000 at the beginning of each year. The lease does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. In addition, the economic life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Prepare Flint’ journal entries on January 1, 2020 (commencement of the operating lease), and on December 31, 2020. Assume the implicit rate used by the lessor is 8%, and this is known to Flint. (Credit account titles are automatically indented when the 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 Debit Credit
1/1/20 Right-of-Use Asset
Lease Liability
1/1/20 Lease Liability
Cash
12/31/20 Lease Expense
Right-of-Use Asset
Lease Liability