Less$-$E Inc. leases a bulldozer from Less$-$O Inc on Jan I", $2023$ for four yeara between Jan I", $2023$ and Dec ${31}^{\text{'}\text{'}},2026.$

Less$-$O$\text{'}$s bulldozer has a book value of $$1,000,000$ on Jan I"$\text{'},2023$

Less$-$E agrees to make four equal payments to Less$-$O on the following days: Jan $1",2023$; Dec $31",2023$; Dec $31",2024$; and Dec $31",2025.$

The useful life of the bulldozer is four years at the end of which the residual value is $150,000$

Less$-$E$\text{'}$s borrowing rate for similar transactions is $15\%.$

Let's assume this is a sales$-$type lease without profit for the lessor. That is$,$ the present value of the lessee's payments equal the book value less the present value of any residual value returned to the lessor.

Record journal entries for both the lessor and the lessee.