10 Problem 2.1: Chapter 21 - Leases (15 points) On January 1, 2020, Kara Danvers leased an airplane from Diana Prince. The lease terms are as below. Lease Term (yrs) Guaranteed Residual Value $0 Minimum Lease Payment $250,000 Expected Residual Value $300,000 Fair Value $2,000,000 Lessee Attorney Fees (on 1/1/2020) $15,000 Asset Cost (on Stitch's Books) $1,650,000 Ownership at End of Lease Diana Prince Asset Life (yrs) 15 If applicable, Diana Prince depreciates all assets on a straight-line basis. Kara Danvers uses 9% as its required rate of return when calculating lease returns. Diana Prince has an 8% imputed interest rate and Kara Danvers is aware of this. All amounts are paid on January 1 of each year. Both Danvers and Prince have December 31 year-ends. REQUIRED: Answers the following for Kara Danvers: (PLEASE CLEARLY SHOW AND LABEL YOUR WORK) (a) [2 pts] What is the classification of this lease and why? (b) [4 pts] What is the journal entry for January 1, 2020? () [4 pts] What is the journal entry for December 31, 2020? (d) [2 pts] What is the journal entry for January 1, 2021? (e) [3 pts] What is the journal entry for December 31, 2021? Problem 2.2: Chapter 21 - Leases (12 points) Using all of the information provided in Problem 2.1, answer the below questions for Diana Prince. REQUIRED: Answers the following for Diana Prince: (PLEASE CLEARLY SHOW AND LABEL YOUR WORK) (a) [1 pt] What is the classification of this lease and why? (b) [5 pts] What is the journal entry for January 1, 2020? ( ) [2 pts] What is the journal entry for December 31, 2020? (d) [2 pts] What is the journal entry for January 1, 2021? (e) [2 pts] What is the journal entry for December 31, 2021