1. On January 1, 2020, Firm Lessee signed a non-cancelable 4-year lease for a machine. According to the lease contract, Firm Lessee makes annual lease payments of $9,000 at the beginning of each year, starting January 1, 2020. The machine has an estimated useful life of 4 years and a $1,000 residual value at the end of year 4. The machine reverts back to the lessor at the end of the lease term. Firm Lessee uses the straight-line method of depreciation for all of its plant assets. Assume that both Firm Lessee and Firm Lessor use 10% as a discount factor. (a) What type of lease is this? Explain

b) Compute the present value of the lease payments for Firm Lessee.

(c) Prepare all necessary journal entries for Firm Lessee for this lease through January 1, 2021. Date Lease Payment, Interest (10%), Reduction of Lease Liability, Lease Liability 1/1/2020 1/1/2021 1/1/2022 1/1/2023