Hui Corporation has negotiated a lease for new machinery. The machinery has a fair value of \(\$ 550,000\) and an expected economic life of seven years. The lease has a five-year term. Annual rental is paid at the beginning of the lease year, in the amount of \(\$ 104,300\). Insurance and operating costs, approximately \(\$ 16,500\), are paid directly by Hui Corporation in addition to the lease payments. At the end of the lease term, the machinery will revert to the lessor, which will sell it for an expected \(\$ 75,000\). If the lessor does not realize \(\$ 75,000\) in the sale, then Hui has agreed to make up the difference. Hui does not know the lessor's implicit interest rate.

Required:

1. Prepare an amortization table for the lease. Hui's IBR is \(10 \%\).

2. Assume that the lease was entered into on 1 January 20X2. Hui Corporation has a 31 December fiscal year-end. Prepare journal entries for the lease for 20X2, including depreciation.

3. Prepare the entry to record the lease termination, assuming that the asset is sold by the lessor for \(\$ 60,000\) and that Hui Corporation makes up the \(\$ 15,000\) shortfall. Record interest to the date of the transaction first.