For all the following lease transactions, if Ilini needs to depreciate the leased equipment, use

"depreciation expense." If the lease classification is operating lease, use "rental expense" for all

related expenses.

Illini leases equipment from Cubs Corporation under a four$-$year lease agreement on $\frac{1}{1}\frac{?}{20}1.$

The lease specifies annual payments of $$36,000$ on each $\frac{1}{1}$ and beginning $\frac{1}{1}\frac{?}{20}1.$ The annual

lease payment includes a yearly $$1,000$ maintenance fee paid to Cubs for providing relevant

maintenance services on the equipment. Illini has the option to buy the equipment at the end of

the lease term $($i$.$e$.,\frac{12}{31}\frac{?}{20}4)$ for $$20,000$ when the fair value of the equipment is expected to

be $$60,000.$ The expected useful life of the equipment is five years with no residual value. The

implicit rate is $10\%$

$2.$Illini leases another piece of equipment from Cubs Corporation under a four$-$year lease

agreement on $\frac{1}{1}\frac{?}{20}1.$ The lease specifies annual payments on each $\frac{1}{1}$ and the first payment of

$$10,000$ is made on $\frac{1}{1}\frac{?}{20}1.$ The lease also specifies a $3\%$ annual increase in the lease

payments. The equipment has a fair value of $$100,000$ on $\frac{1}{1}\frac{?}{20}1.$ The expected useful life of

the equipment is $10$ years with no residual value. The equipment will be returned to Cubs at the

end of the lease term. The implicit rate is $10\%.$

Based on these two leases fill out the following information.