P$21\mathrm{.}1($LO $2,4)($Lessee Entries, Finance Lease$)$ The following facts pertain to a non$-$cancelable lease agreement between Faldo Leasing Company and Vance Company, a lessee.

Commencement date

January $1,2020$

Annual lease payment due at the beginning of each year, beginning with January $1,2020$

$$113,864$

Residual value of equipment at end of lease term, guaranteed by the lessee

$$50,000$

Expected residual value of equipment at end of lease term

$$45,000$

Lease term

$6$ years

Economic life of leased equipment

$6$ years

Fair value of asset at January $1,2020$

$$600,000$

Lessor's implicit rate

$8\%$

Lessee's incremental borrowing rate

$8\%$

The asset will revert to the lessor at the end of the lease term. The lessee uses the straight$-$line amortization for all leased equipment.

Instructions

a$.$ Prepare an amortization schedule that would be suitable for the lessee for the lease term.

b$.$ Prepare all of the journal entries for the lessee for $2020$ and $2021$ to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee's annual accounting period ends on December $31.$

c$.$ Suppose Vance received a lease incentive of $$5,000$ from Faldo Leasing to enter the lease. How would the initial measurement of the lease liability and right$-$of$-$use asset be affected? What if Vance prepaid rent of $$5,000$ to Faldo?