Sheffield Corporation agrees on January 1, 2020, to lease equipment from Packers, Inc. for 3 years. The lease calls for

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Sheffield Corporation agrees on January 1, 2020, to lease
equipment from Packers, Inc. for 3 years. The lease calls for
annual lease payments of $19,500 at the beginning of each year. The
lease does not transfer ownership, contain a bargain purchase
option, and is not a specialized asset. In addition, the economic
life of the equipment is 10 years, and the present value of the
lease payments is less than 90% of the fair value of the
equipment.

Prepare Sheffield’ journal entries on January 1, 2020 (commencement
of the operating lease), and on December 31, 2020. Assume the
implicit rate used by the lessor is 6%, and this is known to
Sheffield. (Credit account titles are automatically
indented when the amount is entered. Do not indent manually.
For calculation purposes, use 5 decimal places as displayed in the
factor table provided and round final answers to "0" decimal
places, e.g. 5,275. Record journal entries in the order presented
in the problem.)