1-13 Use the information below to answer the following questions. On December 31, 2017, Reagan Inc. signed a lease with Silver Leasing Co. for some equipment having a seven-year useful life. The lease payments are made by Reagan annually, beginning at signing date. Title does not transfer to the lessee, so the equipment will be returned to the lessor on December 31, 2023. There is no purchase option, and Reagan guarantees a residual value to the lessor on termination of the lease. Reagan's lease amortization schedule appears below Decrease in Outstanding Dee. 31 2017 2017 2018 2019 2020 2021 2022 2023 Payments Interest Balance Balance S 90,000 S 90,000 90,000 S 90,000 S 90,000 90,000 S 36,000 S 17,165 14,251 11,221 8,070 4,793 1,385 S 90,000 72,835 75,749 78,779 81,930 85,207 4,615 S 519,115 429,115 356,280 280,531 201,752 119,822 34,615 IA) In this situation, what type of lease is to Reagan?: IB) In this situation, what type of lease is to Silver leasing? 2) What is the balance of the lease liability on Reagan's December 31, 2019, balance sheet (after the third lease payment is made)? 3) At what amount would Reagan record the right-of-use asset at the beginning of the agreement? 4) What is the effective annual interest rate charged to Reagan on this lease? 5) What is the amount of residual value guaranteed by Reagan to the lessor? 6. What amount would the lessee record as annual amortization on the right-of-use asset using the straight-line method? 7. What amount would the lessee record as annual amortization on the right-of-use asset using the straight-line method if it had been a finance lease to the lessee because of the fulfillment of bargain purchase condition? 8) What would be the outstanding balance after the last payment? 9. What is the total interest paid over the term of the lease? 10.) What would be the amount of interest expense recorded with payment 5 1. What entry will be made by the lessee at the inception of the lease 12. What entry will be made by the lessee in year 20207 3. What entry will be made by the lessor in year 20207