2016, ABC Company leased a copier from XYZ. The three-year lease agreement specifies annual payments of $50,000 beginning January 1, 2016, the inception of the lease, and at each January 1 thereafter through 2018. The useful life of the copier is estimated to be ten years. Before deciding to lease, ABC considered purchasing the copier for its cash price of $230,000. If funds were borrowed to buy the copier, the interest rate would have been 8%. ABC Company paid a commission of $4,000 to arrange this lease.

a) How would this lease be classified by the lessee? Be specific and provide supporting computations.

b) Prepare the journal entry to record the lease on January 1, 2016. Provide supporting computations.

c) Prepare the journal entry required on December 31, 2016. Provide supporting computations

d) Prepare the entries required in 2017 and 2018 related to this lease. Provide supporting computations