1, On June 30, year 1, Warner, Inc. leased a warehouse equipment from Lilly, Inc. The lease agreement calls for Warner to make semiannual lease payments of $546,915 over a four-year lease term (also the assets useful life), payable each June 30 and December 31, with the first payment at June 30, year 1. Warner's incremental borrowing rate is 12%, the same rate Lilly used to calculate lease payment amounts. Lilly manufactured the equipment at a cost of $2.8 million. Required:

1. Prepare the appropriate entries for both (a) the lessee and (b) the lessor from the beginning of the lease through the end of year 1.

2. prepare amortization table for two years

3. Explain what type of lease is for both, the lessee and the lessor.