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On January 1, 2022, Wells Co. leased a building to Smart inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of 53,500,000 (unguaranteed). 2. The leased building has a t of $4,000,000 and was purchased for cash on January 1, 2022. 3. The building is depreciated on a straight-line basis, estimated life is 50 years with no salvage value: 4. Lease payments are $275,000 per year ( 1 tt payment at inception, the rest of payments at year-end). 5. Smart has an incremental borrowing rate of B%, and the rate implicit in the lease is unknown to Smart. 6. Both the lessor and the lessee are on a calendar-year basis. a) Using the 5 criteria, is this a finance (sales-type) or operating lease? To receive credit for 3 and 4 he cire th chnw untur wink e) Prepare the journal entries for the lessee and lessor for the following dates (if none, use NA). ignore entry for original purchose of building. Show vour work whero nerescan I) Suppose the lease was only for one year instead of 10 years, with just one lease payment at the beginning of the lease term. Prepare any journal entries Smart Inc. would need, assuming it elects to use the short-term lease On lanuary 1, 2022, Wells Co. leased a building to Smart Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $3,500,000 (unguaranteed). 2. The leased building has a cost of $4,000,000 and was purchased for cash on January 1, 2022. 3. The building is depreciated on a straight-line basis, estimated life is 50 years with no salvage value. 4. Lease payments are $275,000 per year ( 1 payment at inception, the rest of payments at year-end). 5. Smart has an incremental borrowing rate of 8%, and the rate implicit in the lease is unknown to Smart. 6. Both the lessor and the lessee are on a calendar-year basis. a) Using the 5 criteria, is this a finance (sales-type) or operating lease? To receive credit for 3 and 4 he sure ta show vour work. e) Prepare the journal entries for the lessee and lessor for the following dates (if none, use NA). lgnore entry for original purchase of building. Show your work where necessary. e) Prepare the journal entries for the lessee and lessor for the following dates (if none, use NA). Ignore entry for original purchase of buildina. Show unur wank ...h.nn. ...... (If none, use NA). lease term. Prepare any only for one year instead of 10 years, with just one lease payment at the beginning of the option