Given the following information about a lease between Lois Company and Leslie Company: On January 1, 2017, Lois leased equipment to Leslie under a 5 year noncancelable lease. Payments of $54,316, with the first payment due January 1, 2017 and subsequent payments are due each December 31, starting December 31, 2017. Leslie may exercise a bargain purchase option of $10,000 (at the end of the lease on 12/31/21) to acquire the equipment. Lois generates a 6% return on its investment. Leslie's incremental borrowing rate is also 6%. At the end of 5 years, the equipment should have a salvage value of $10,000. Collectibility of the lease payments is reasonably predictable and there are no important uncertainties surrounding the amount of costs yet to be incurred by Lois. 1. What type of lease is this? 2. Prepare an amortization schedule through 12/31/17 for Leslie, using the effective interest method (round to nearest whole numbers). 3. Prepare all of the journal entries for 2017 on the books of Leslie to record all of the lease activity, including depreciation expense (assume straight line for depreciation). Round all journal entries to nearest whole dollar. 4. Activity for Lois (the lessor). Assume that the fair value of the equipment at the inception of the lease is $200,000 and the cost of the equipment to Lois is also $200,000. Prepare all of the journal entries (in whole dollars) on the books of Lois to record the lease activity for 2017. 1. Type of Lease: (Finance (Sales-Type/Direct Financing) vs. Operating_ 2. Amortization Schedule/Journal Entries Date Cash Paid 1/1/17 1/1/17 12/31/17 Initial Lease Payment 1 (1/1/17) Payment 2 (12/31/17) 3. Depreciation JE (12/31/17) Interest Expense Amortization Carrying Value Lessee Lessor