Chapins Manufacturing Company leased a piece of nonspecialized machinery for use in its operations from Hemlock Leasing on January 1. The 11-year lease requires lease payments of $2,500 due on January 1 of each year. The machinery is estimated to have a 11-year life, is depreciated on the straight-line method, and will have no residual value at the end of the lease term The present value of the lease payments using 12.4% and the asset's fair value on the date the lease is signed both equal $16,397. Hemlock paid fair value to acquire the equipment the day before lease commencement. The lessor's implicit rate of 12.4% is known to Chapins. Collection of all lease payments is reasonably assured. Prepare Chapins Manufacturing's journal entries at the commencement of the lease and at the end of the first year. -h1 ng Begin by classifying the lease agreement for Chapins Manufacturing. Identify any of the Group I criteria that Chapins meets. (Select all that apply.) Group / Criteria: 1. The lease transfers ownership to the lessee at the end of the lease term. 2. The lessee is given an option to purchase the asset that the lessee is reasonably certain to exercise. 3. The lease term is for a major part of the economic life of the asset. 4. The present value of the sum of the lease payments and any residual value the lessee guarantees to pay (that is not otherwise included in the lease payment) is equal to substantially all of the asset's fair value. 5. The leased asset is of a specialized nature. 6. The lease does not meet any Group I lease criteria. This is a(n) lease for the lessee (Chapins Manufacturing) because of the Group I criteria is(are) met. Now prepare the entry at the lease commencement date. Exclude the first annual lease payment from this entry. We will record that payment in the next step. (Record debits first, then credits. Exclude explanations from any journal entries.) ] 3. The 74. The Now prepare the entry at the lease commencement date. Exclude the first annual lease payment from this entry. We will record that payment in the next step. (Record debits first, then credits. Exclude explanations from any journal entries.) all of Account January 1, Year 1 ] 5. The ] 6. The his is a(n) ow prepar