equipment at a price of $8,002,390. Jerusalem immediately leased the equipment to the Israel 1. 20X0, Jerusalem Leasing Corporation (lessor) purchased ten pieces of heavy made at the beginning of each year, beginning on January 1. 20X0. The equipment has a remaining Mining Company on the same date. The lease calls for eight annual payments of $1,500,000 to be useful life of eight years. The lease contract contains no renewal clause, and there is no bargain lease and there is no guaranteed residual value required by the lessee for the equipment. The purchase option in the lease contract. The equipment reverts back to Jerusalem at the end of the collectibility of the payments is reasonably certain, and there are no important uncertainties regarding unreimbursable costs to be incurred by the lessor. The lessor has established a rate of return of 10% in the lease. REQUIRED: (1) (2) What method must Jerusalem Leasing Corporation use to account for this lease? Explain. Using the attached form, prepare an amortization schedule for the entire term of the lease for Jerusalem Leasing Corporation. Round all calculations to the nearest whole dollar. Using the attached forms, prepare all general journal entries, in good form. required under the lease for Jerusalem Leasing Corporation for the first three years of the lease. Assume that Jerusalem has a calendar year for its fiscal year. Provide a brief explanation for each entry being made. (3) (2) Date JERUSALEM LEASING CORPORATION LEASE AMORTIZATION SCHEDULE FOR HEAVY EQUIPMENT Beginning Net Investment Annual Lease Interest Investment in Lee Payment Am Principal Amount Paytm on Net Ending Net Investown in (3) Credit JERUSALEM LEASING CORPORATION GENERAL JOURNAL FOR YEAR 20X1 Debit Date Explanation JERUSALEM LEASING CORPORATION GENERAL JOURNAL FOR YEAR 20X2 Explanation Debit Date Credit 12 JERUSALEM LEASING CORPORATION GENERAL JOURNAL FOR YEAR 20X3 Explanation Credit Date Debit