1, 2017, Seven Wonders Inc. signed a five-year noncancelable lease with Moss On January Company. The lease calls for five payments of $277,409.44 to be made at the end of each year The leased asset has a fair value of $1,200,000 on January 1, 2017. Seven Wonders cannot renew the lease, there is no bargain purchase option, and o to Moss at the lease end. The leased asset has an expected useful life of six years, and Seven is no bargain purchase option, and ownership of the leased asset reverts ers uses straight-line depreciation for financial reporting purposes. Its incremental bor- is 12%. Moss's implicit rate of return on the lease is unknown. Seven Wonders lendar year for financial reporting purposes. Both companies use ASC 840 to account rowing uses for leases. Required: L. Why must Seven Wonders account for the lease as a capital lease? 2, Prepare an amortization schedule for the lease liability. Round the amount of the initial lease liability at January 1, 2017, to the nearest dollar. Round all amounts in the amortiza- tion table to the nearest cent. 3. Prepare the journal entry to record (a) the lease as a capital lease on January 1, 2017; (b) the lease payments on December 31, 2017 and 2018; and (c) the leased asset's depre- ciation in 2017 and 2018. 4. What is the total amount of expense reported on Seven Wonders' 2017 income statement from the lease? Is this amount the same as, more than, or less than the amount that would have been reported if the lease had been classified as an operating lease? Why