On January 1, 2019, Wilcox Inc. leased equipment from Zed Co. for use in the engineering...

On January 1, 2019, Wilcox Inc. leased equipment from Zed Co. for use in the engineering department. The non-cancellable lease is for 6 years with an unguaranted residual value of $5000 and the estimated economic life of the leased equipment is 8 years. The lease does not contain automatic title transfer or a bargain purchase option. Lease payments are $9000 per year, payable each December 31. The incremental borrowing rate for Wilcox is 8% and Zed's implicit interest rate (known by Wilcox) is 6%. Wilcox uses straight-line depreciation for the equipment. To Zed, the equipment had a cost of $44000 and fair value of $48000. The collectability of the lease payments is probable for the lessor. Instructions: Provide the necessary journal entries to record the transactions for the lessee and lessor for the period January 1, 2019 through December 31, 2020.

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