Assume that Tropical has reasonable assurance that Bayview will make the remaining lease payments. All costs of operating the leased equipment are borne by Bayview. Assume that both companies have a December 31st year end. Answer the following relative to the above information. Criteria Assessment 1. Does the lessee have the option to purchase the asset at a price that is expected to be substantially lower than the fair value at the date the option becomes exercisable? 2. Is the lease term for the major part of the economic life of the asset even if title is not transferred? 3. $ x PVIF Calculate the present value of the lease (use four decimal places for your calculations and round your answer to the nearest dollar). + $2,000 x PVIF = $ 4. At the inception of the lease, does the present value of the minimum lease payments amounts to at least substantially all (greater than 90%) of the fair value of the leased asset? From the perspective of the lessor, what kind of lease is the above? Leave us a Message 1 On January 3, 2019, Tropical Inc. leased a specialized piece of diagnostic equipme are as follows: Bayview Medical Clinic. Details Cost to manufacture to Tropical Normal sales price $ 80,000 $100,000 Lease term 8 years 10 years Economic Life Residual value at the end of the lease term $20,000 Residual value at end of useful life $ 500 Lease payment (1st payment payable January 3, 2019) $16,881 Purchase option (exercisable at end of year 8) $ 2,000 Incremental borrowing rate of Bayview 12% Rate implicit in the lease 1096 Assume that Tropical has reasonable assurance that Bayview will make the remaining lease paymente. All costs of operating the leased equipment are borne by Bayview. Assume that both companies have a Decen Chat with us Prepare the journal entries for the Lessee and the Lessor for 2019 and 2020 below. Round to the nearest dollar