Bidwell Leasing purchased a single-engine plane for $470,000 and leased it to Red Baron Flying Club for its fair value of $828,269 on January 1, 2018. (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.) Terms of the lease agreement and related facts were:

Eight annual payments of $145,000 beginning January 1, 2018, the inception of the lease, and at each December 31 through 2024. Bidwell Leasings implicit interest rate was 11%. The estimated useful life of the plane is eight years. Payments were calculated as follows:

Amount to be recovered (fair value)	$	828,269
Lease payments at the beginning of each of the next eight years: ($470,000 5.7122*)	$	145,000

* Present value of an annuity due of $1: n = 8, i = 11%

Red Barons incremental borrowing rate is 12%.

Costs of negotiating and consummating the completed lease transaction incurred by Bidwell Leasing were $22,652.

Required: 1. How should this lease be classified (a) by Bidwell Leasing (the lessor) and (b) by Red Baron (the lessee)? 2. Prepare the appropriate entries for both Red Baron Flying Club and Bidwell Leasing on January 1, 2018. Record the lease for Red Baron Flying Club.Record the lease payment for Red Baron Flying Club. Record the lease for Bidwell Leasing. Record the initial direct costs for Bidwell Leasing. Record the cash received on lease.? 3. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Red Baron Flying Club. 4. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2018 (the second lease payment). Both companies use straight-line depreciation. Record the lease payment for Red Baron Flying Club. Record the amortization expense for Red Baron Flying Club. Record the cash received on lease. 5. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2024 (the final lease payment). Record the lease payment for Red Baron Flying Club. Record the amortization expense for Red Baron Flying Club. Record the cash received on lease

How should this lease be classified (a) by Bidwell Leasing (the lessor) and (b) by Red Baron (the lessee)?

(a)	Bidwell
(b)	Red baron	?

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Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Red Baron Flying Club. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.)

Lease Amortization Schedule
Date	Payments	Effective Interest	Decrease in Balance	Outstanding Balance
1/1/18
12/31/18
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24