On January 2, 2020, Wayne Inc. signed an eight-year lease for office space for \(\$ 24,000\) annually, with the first payment due immediately. Wayne has the option to renew the lease for an additional four-year period on or before January 2, 2028, at market lease rates at the time of renewal. Wayne intends to evaluate rental options at the time of the option to renew. The remaining economic life of the office is 30 years. Wayne Inc. is not aware of the implicit rate of the lease but has an incremental borrowing rate of \(7 \%\). Wayne Inc. paid \(\$ 1,000\) on January 2, 2020 , for initial direct costs.

Required

a. How would Lessee Inc. classify the lease?

b. Prepare an amortization schedule of the lease liability.

c. Prepare an amortization schedule of the right-of-use asset.

d. Prepare the entries for Wayne Inc. for years 2020 and 2021, assuming Wayne Inc.'s accounting year ends December 31.