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Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2018, Rhone-Metro leased equipment to Western Soya Co. for a four-year period ending December 31, 2022, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost $370,000 to manufacture and has an expected useful life of six years. Its normal sales price is $402,611. The expected residual value of $20,000 at December 31, 2022, is not guaranteed. Equal payments under the lease $115,000 (including $5,000 maintenance costs) and are due on December 31 of each year. The first payment was made on December 31, 2018. Western Soya's incremental borrowing rate is 11%. Western Soya knows the interest rate implicit in the lease payments is 9%. Both companies use straight-line depreciation. (FV of $1, PV of $1. FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) are. Required: 1. Show how Rhone-Metro calculated the $115,000 annual lease payments. 2. How should this lease be classified (a) by Western Soya Co. (the lessee) and (b) by Rhone-Metro Industries (the lessor)? 3. Prepare the appropriate entries for both Western Soya Co. and Rhone-Metro on December 31, 2018 4. Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee and the lessor. 5. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2019 (the second lease payment and amortization) 6. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2022, assuming the equipment is returned to Rhone-Metro and the actual residual value on that date is $1,200. Show how Rhone-Metro calculated the $115,000 annual lease payments. (Round your intermediate and final answers to nearest whole dollar.) Unguaranteed Residual Value Table or calculator function: PV of $1 n = Present Value Amount to be recovered Less: Present value of the unguaranteed residual value Amount to be recovered through periodic lease payments Lease Payments Table or calcu lator function: n = Lease Payments Lease payments at the beginning of each of four years Lease payments including executory costs How should this lease be classified (a) by Western Soya Co. (the lessee) and (b) by Rhone-Metro Industries (the lessor))? Western Soya Co. Finance lease Rhone-Metro Industries Sales-type lease Prepare the appropriate entries for Western Soya Co. on December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar.) View transaction list View journal entry worksheet General Journal Credit No Date Debit December 31, 2018 1 Right-of-use asset Lease payable December 31. Lease payable 2 2018 Cash Prepare the appropriate entries for Rhone-Metro on December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar.) View transaction list View journal entry worksheet General Journal No Date Debit Credit December 31. 2018 Lease receivable Equipment December 31. 2018 2 Cash Lease receivable Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) Lease Amortization Schedule Effective Decrease in Outstanding Dec.31 Payments Interest Balance Balance 2018 2019 2020 2021 0 C Required 3 L Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessor. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) Lease Amortization Schedule Outstanding Effective Decrease in Dec.31 Payments Interest Balance Balance 2018 2018 2019 2020 2021 2022 C 0 Docuired 4 Loccoo Poguired ELocsoo. 1 Record amortization expense in the books of lessee. Record maintenance expense in the books of lessee 2 3 Record cash payment in the books of lessee. Prepare the appropriate entries for Rhone-Metro on December 31, 2019 (the second lease payment and amortization). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar.) View transaction list View journal entry worksheet No Date General Journal Debit Credit December 31. 2019 1 Cash Lease receivable Interest revenue Required 5 Lessee Required 6 Lessee Prepare the appropriate entries Western Soya on December 31, 2022, assuming the equipment is returned to Rhone-Metro and the actual residual value on that date is $1,200. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar.) View journal entry worksheet View transaction list Credit No Date General Journal Debit December 31 Amortization expense 1 2022 Right-of-use asset December 31, 2022 Loss on residual value guarantee 2 Cash Prepare the appropriate entries for Rhone-Metro on December 31, 2022, assuming the equipment is returned to Rhone-Metro and the actual residual value on that date is $1,000. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar.) View journal entry worksheet View transaction list General Journal No Date Debit Credit December 31 2022 Equipment 1 1,000 Cash Lease receivable Interest revenue