I need to figure out this lease problem and I am lost.

Intermediate Accounting II Assessment - Leases Spring 2016 Name Leases On January 2, 2013, Smith Co. entered into a noncancelable lease for new equipment with Jones Co. Rental payments are $320,467 a year for six years beginning on January 2, 2013. Subsequent lease payments will be on December 31st of each year. The useful life of the leased equipment is nine years. The implicit rate, known to the lessee, is 8%. The incremental borrowing rate for Smith is 10%. Both companies have calendar year ends. Jones company is reasonably certain that lease payments are collectible and there are no major uncertainties of costs. The fair market value of the lease asset is $1,600,000. Smith records depreciation over the lessorof the useful life or the lease term using the straight line method. There is no salvage value for Smith. The equipment was purchased by Jones for $1,250,000. Inventory was debited for this purchase. Part 1 (There are two parts) Is this a capital lease to the lessee? Why? PV of minimum lease payments Is this a capital lease to the lessor? Why? Give the entries on Smith Co.'s books for 2013, 2014, and 2015 Date Debit 1/2/2013 1/2/2013 12/31/2013 Credit 12/31/2014 12/31/2015 Give the entries on Jones Co.'s books for 2013, 2014, and 2015 Date Debit 1/2/2013 12/31/2013 12/31/2014 Credit 12/31/2015 Part 2 Assume that the lessee is not aware of the implicit rate Is this a capital lease to the lessee? Why? PV of minimum lease payments Is this a capital lease to the lessor? Why? Give the entries on Smith Co.'s books for 2013, 2014, and 2015 Date Debit 1/2/2013 1/2/2013 12/31/2013 12/31/2014 12/31/2015 Credit nt with 2, 2013. seful life or this purchase. Lease Obligation