E21.13B (LO 2,4) (Lessee-Lessor Entries; Sales-Type Lease; Guaranteed Residual Value) Flanigans Company leases a building to Wellington, Inc. on January 1, 2020. The following facts pertain to the lease agreement: 1. The lease term is 6 years, with equal annual rental payments of $7,652 at the beginning of each year. 2. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. 3. The building has a fair value of $42,000, a book value to Flanigans of $37,000, and a useful life of 7 years. 4. At the end of the lease term, Flanigans and Wellington expect there to be an unguaranteed residual value of $3,000. 5. Flanigans wants to earn a return of 6% on the lease, and collectibility of the payments is probable. This rate is known by Wellington Instructions (Round all numbers to the nearest dollar.) (a) How would Flanigans (lessor) and Wellington (lessee) classify this lease? How would Flanigans initially measure the lease receivable, and how would Wellington initially measure the lease liability and right-of-use asset? (b) Using the original facts of the lease, show the journal entries to be made by both Flanigans and Wellington in 2020. (c) Suppose the entire expected residual value of $3,000 is guaranteed by Wellington. How will this change your answer to part (a)? (d) Assume the same facts as part (c), except the expected residual value is $2,000. Does your answer change