In May 20X0, LFT entered into the following arrangement to lease some manufacturing equipment starting on 1 June 20X0. Additional details are as follows:
• The lease term commences on 1 June and is 5 years. The company has a 2 year option to renew at the same rate, which they expect to exercise.
• Lease payments are $80,000 per year, payable on 1 June. In addition, $15,000 is payable to the lessee each year for maintenance.
• The asset is new at the inception of the lease term and is worth $875,000.
• Estimated useful life of the leased asset is 10 years.
• LFT’s incremental borrowing rate is 7%. The rate implicit in the lease is 9.6% and is known the LFT.
• LFT has a 31 December fiscal year-end.
• The guaranteed residual value of the leased asset will be $50,000 at the end of the initial lease term.
• LFT depreciates its assets on a straight-line basis.
• LFT elects to not separate non-lease components.

Required:
1. Prepare a table showing how the lease liability reduces over the lease term.
2. Record the entries for 20X0 and 20X1.