Accounting for Leases On January 3, 2020, Hanna Corporation signed a lease on a machine for its manufacturing operation and the lease commences on the same date. The lease requires Hanna to make six annual lease payments of $12,000 with the first payment due December 31,2020. Hanna could have financed the machine by borrowing the purchase price at an interest rate of 7%. a. Prepare the journal entries that Hanna Corporation would make on January 3 and December 31, 2020, to record this lease assuming. i. the lease is reported as an operating lease. ii. the lease is reported as a finance lease. b. Post the journal entries of part a to the appropriate T-accounts. c. Show how the entries posted in part b would affect the financial statements using the financial statement effects template. Note: Round answers to the nearest dollar. Use rounded answers for subsequent computations, Journal entries T-accounts Financial statement effects template Debit OX Credit 0 0X i. The lease is reported as an operating lease. Date Description 1/3/19 Right-of-use asset-operating lease Operating lease liability 12/31/19 Operating lease liability Cash 12/31/19 Operating lease expense Right-of-use asset - operating lease Operating lease liability OX 0 0 x 12,000 0 OX Credit Debit 57,198 0 ii. The lease is reported as a finance lease. Date Description 1/3/19 Right-of-use lease asset - finance lease Finance lease liability 12/31/19 Amortization expense - finance lease Accumulated amortization - finance lease 12/31/19 Interest expense Finance lease liability 9,533 57,198 0 9,533 0 OX 0X 0 Note: Round answers to the nearest dollar. Use rounded answers for subsequent computations. Journal entries T-accounts Financial statement effects template i. the lease is reported as an operating lease. Operating Lease Liability OX 57,198 0 0 x Cash Right-of-use Asset-Operating Lease 57,198 0 x 0 12,000 Lease Expense 0 0 ii. the lease is reported as a finance lease. Cash Finance Lease Liability 7,996 57,198 Accumulated Amortization 0 9,533 0 12,000 Interest Expense 4,004 Amortization Expense 9,533 0 0 Right-of-use Asset-Finance Lease 57,198 0 Note: Round answers to the nearest dollar. Use rounded answers for subsequent computations. Journal entries T-accounts Financial statement effects template Note: Use negative signs with your answers, when appropriate. i. the lease is reported as an operating lease. Balance Sheet Income Statement Contra Net Noncash Assets Cash Asset Assets Contributed Capital 0 Earned Capital 0 Liabilities 57,198 Revenues Income Expenses 0 0 57,198 0 0 0 Transactions Operating leasecommences. Lease payment. Record leaseexpense andchanges to assetand liability. (12,000) 0 0 0 x 0 0 0 0 0 0 0 x O 4,004 O 0 x O 0 x 0 X ii. the lease is reported as a finance lease. Income Statement Balance Sheet Noncash Contra Assets Assets Cash Asset Contributed Capital 0 Net Income Liabilities Earned Capital 0 Revenues Expenses 0 0 57,198 0 57,198 0 0 Transactions Finance leasecommences. Amortization ofleased asset. Made annualpayment. 0 0 9,533 0 0 0 (9,533) (4,004) 9,533 4,004 (9,533) (4,004) (12,000) O 0 (7,996) 0 0