d. Prepare the entries for Lessee Inc. for the years 2020 and 2021, assuming Lessee Inc.'s accounting year ends December 31. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round your answers to the nearest whole dollar. Dr. Cr. X 0 x 0 0 0 x 0 x 0 0 0 x 0 x 0 0 0 x Date Account Name Jan. 1, 2020 Lease Liability Right-of-Use Asset X To record lease liability and right-of-use asset Jan. 1, 2020 Lease Expense x Cash To record lease payment Dec. 31, 2020 Lease Receivable X Lease Liability Right-of-Use Asset A To record lease expense Jan. 1, 2021 Interest Revenue X Right-of-Use Asset A X To record lease payment Dec. 31, 2021 Lease Liability A X Right-of-Use Asset X Right-of-Use Asset To record lease expense O 0 x 0 x 0 0 0 x 0 x 0 o 0 x 0 0 x Reporting Operating Lease-Lessee On January 1, 2020, Lessee Inc. Teased equipment at an annual payment of $255,297 payable at the beginning of each year for 4 years. The equipment had a fair value of $1,200,000, a book value of $1,125,000, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of 8 years and an estimated residual value of $375,000, not guaranteed by the lessee. Lessor's implicit rate is 7.5%, which is unknown to the lessee. The lessee's incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease. a. How would Lessee Inc. classify the lease? Operating Lease b. Prepare an amortization schedule of the lease liability. Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Note: Include any net rounding difference to Lease Liability in the Interest on Liability amount for Jan. 1, 2027. Lease Payment Interest on Liability Date Reduction of Lease Liability Lease Liability $ 0 x 0 x $ 0 $ OX 0 x Jan. 1, 2020 Jan. 1, 2020 $ Jan. 1, 2021 Jan. 1, 2022 Jan. 1, 2023 0 x OX 0 x 0 X 0 x 0 x OX OX Ox 0 x 0 x O Total $ 0 x $ 0 x $ 0 x C. Prepare an amortization schedule of the right-of-use asset. Straight-Line Expense Interest Amortization of on Liability Right-of-Use Asset Right-of-Use Asset Date Jan. 1, 2020 $ 0 x Year 2020 $ 0 x $ 0 x $ 0 x 0 x Year 2021 0 x 0 x 0 x 0 X Year 2022 0 x Ox 0 x 0 x Year 2023 0 x 0 OX 0 Total $ 0 x $ 0 X $ 0 x d. Prepare the entries for Lessee Inc. for the years 2020 and 2021, assuming Lessee Inc.'s accounting year ends December 31. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round your answers to the nearest whole dollar. Dr. Cr. X 0 x 0 0 0 x 0 x 0 0 0 x 0 x 0 0 0 x Date Account Name Jan. 1, 2020 Lease Liability Right-of-Use Asset X To record lease liability and right-of-use asset Jan. 1, 2020 Lease Expense x Cash To record lease payment Dec. 31, 2020 Lease Receivable X Lease Liability Right-of-Use Asset A To record lease expense Jan. 1, 2021 Interest Revenue X Right-of-Use Asset A X To record lease payment Dec. 31, 2021 Lease Liability A X Right-of-Use Asset X Right-of-Use Asset To record lease expense O 0 x 0 x 0 0 0 x 0 x 0 o 0 x 0 0 x Reporting Operating Lease-Lessee On January 1, 2020, Lessee Inc. Teased equipment at an annual payment of $255,297 payable at the beginning of each year for 4 years. The equipment had a fair value of $1,200,000, a book value of $1,125,000, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of 8 years and an estimated residual value of $375,000, not guaranteed by the lessee. Lessor's implicit rate is 7.5%, which is unknown to the lessee. The lessee's incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease. a. How would Lessee Inc. classify the lease? Operating Lease b. Prepare an amortization schedule of the lease liability. Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Note: Include any net rounding difference to Lease Liability in the Interest on Liability amount for Jan. 1, 2027. Lease Payment Interest on Liability Date Reduction of Lease Liability Lease Liability $ 0 x 0 x $ 0 $ OX 0 x Jan. 1, 2020 Jan. 1, 2020 $ Jan. 1, 2021 Jan. 1, 2022 Jan. 1, 2023 0 x OX 0 x 0 X 0 x 0 x OX OX Ox 0 x 0 x O Total $ 0 x $ 0 x $ 0 x C. Prepare an amortization schedule of the right-of-use asset. Straight-Line Expense Interest Amortization of on Liability Right-of-Use Asset Right-of-Use Asset Date Jan. 1, 2020 $ 0 x Year 2020 $ 0 x $ 0 x $ 0 x 0 x Year 2021 0 x 0 x 0 x 0 X Year 2022 0 x Ox 0 x 0 x Year 2023 0 x 0 OX 0 Total $ 0 x $ 0 X $ 0 x