Cheyenne Incorporated leases a piece of equipment to Sage Hill Corporation on January 1, 2017. The lease agreement called for annual rental payments of $5,037 at the beginning of each year of the 4-year lease. The equipment has an economic useful life of 6 years, a fair value of $25,500, a book value of $20,500, and both parties expect a residual value of $8,200 at the end of the lease term, though this amount is not guaranteed. Cheyenne set the lease payments with the intent of earning a 5% return, and Sage Hill is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.

a) Determine the nature of the lease to both Cheyenne and Sage Hill. The lease is a/an Entry field with correct answer lease to Cheyenne. The lease is a/an Entry field with correct answer lease to Sage Hill. Click if you would like to Show Work for this question: Open Show Work SHOW LIST OF ACCOUNTS SHOW SOLUTION LINK TO TEXT LINK TO TEXT Attempts: 2 of 3 used Collapse question part

(b) Prepare the lease amortization schedule(s) for Sage Hill for all 4 years of the lease. (Round answers to 0 decimal places, e.g. 5,275.) SAGE HILL CORPORATION Lease Amortization Schedule Annuity-Due Basis Date Annual Payment Interest on Liability Reduction of Lease Liability Lease Liability 1/1/17 $ $ $ $ 1/1/17 1/1/18 1/1/19 1/1/20 Lease Expense Schedule Date Lease Expense (Straight-Line) Interest on Lease Liability Amortization of ROU Asset Carrying Value of ROU Asset 1/1/17 $ $ $ $ 12/31/17 12/31/18 12/31/19 12/31/20