(1) What type of lease is this to Chipola Company? Explain.

(2) Prepare an amortization schedule for the lessee. Round all calculations to the nearest whole dollar.

(3) Prepare all necessary journal entries, in proper general journal form, that would be required on the lessees books for the entire life of the lease. Provide a brief explanation for your entries.

Chipola Company, as lessee, enters into a lease agreement on July 1, 20X8, for equipment. The following data are relevant to the lease agreement. (1)The term of the noncancelable lease is 4 years, with no renewal option. Payments of S422,689 are due on June 30 of each year (2) The fair value of the equipment on July 1, 20X8 is $1,400,000. The equipment has an economic life of 6 years with no salvage value. The lease contains a guaranteed residual value of $15,000 (3) Chipola depreciates similar machinery it owns using sum-of-the-years'-digits depreciation (4) The lessee pays all executory costs. (5) | Chipola's incremental borrowing rate is 10% per year. The lessee is aware that the lessor used an implicit rate of 8% in computing the lease payments