How would I record the necessary journal entries using this information?

- It is an operating lease.

- On November 1, 2019 (the beginning of the fiscal year), CAP acquired a of its equipment through a lease agreement with Lessor Corp. The lease contract has the following terms and conditions:

- CAP agrees to lease equipment from Lessor Corp. with a fair market value of $900,000

- The term of the lease is for seven years, with annual rental payments of $145,000 due at the beginning of each year. CAP knows the implicit interest rate on the lease agreement is 5%. CAP knows that it could borrow at an incremental rate of 6%.

- There is no residual value.

- CAP will cover the executory costs associated with the lease. The executor costs will be approximately $10,000 per annum and are included as part of the $145,000 rental payment.

- The lease offers a bargain purchase option to purchase the equipment for $50,000 at the end of the seventh year. At the end of year seven, the fair market value of the asset is expected to be $70,000.

- The first payment was made on November 1, 2019, with annual payments thereafter