On January $1,2024,$ Pedro Industries leased equipment to Kylie Co$.$ for a four$-$year period, at which time possession of the leased asset will revert back to Pedro. The equipment cost Pedro $$365,765$ and has an expected useful life of six years. Its normal sales price is $$365,765.$ The lessee$-$guaranteed residual value at the end of the lease is $$25,000,$ which is the amount Kylie expects to pay at the end of the lease. Equal payments under the lease are $$100,000$ each year, payable in advance on December $31$ each year except for the first one on January $1,2024.$ Kylie$$s incremental borrowing rate is $12\%.$ Kylie knows the interest rate implicit in the least payments is $10\%.$ Both companies use straight$-$line depreciation.

Required:

$1.$ Prepare the journal entries to record the lease for Kylie $($the lessee$)$ for the year $2024.$

$2.$ Prepare the journal entries to record the lease for Pedro $($the lessor$)$ for the year $2024.$