In January 1, 2018, XYZ Company signs a 4-year, non-renewable and non-cancelable lease agreement to lease equipment from ABC Company The lease agreement requires equal annual rental payment of $90,000 beginning on January 1, 2018. The following information pertains to this lease agreement 1. The Fair value of the equipment at January 1, 2018 is $310,000 2. The equipment has an estimated economic life of 5 years. 3. The yearly rental payment includes $7,245 54 of executory costs related to taxes on the property 4. The lessee's incremental borrowing rate is 10%. The lessor's implicit rate is 9% and is known to the lessee 5. The equipment will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $24,000, none of which is guaranteed 6 Both XYZ Company and ABC Company uses the straight-line method of depreciation Additional information: The present value of an Ordinary Annuity of $1 and the present value of an Annuity Due of $1 for 5 periods at 8%, 9% and 10% are as follows The present value of an Ordinary Annuity of $1 Period 8% 9% 10% 1 0.92593 0.91743 090909 2 1.78326 1.75911 1.73554 3 2.57710 253129 2.48685 4 3.31213 323972 3.16987 5 3.99271 3.88965 3.70079 The present value of an Annuity Due of $1 Period 8% 9% 10% -N5 1 1.00000 1.00000 1.00000 192503 191743 1.00000 2.78326 2.75011 2.73554 3.57710 3.53129 3.48685 431221 4 23972 4.16987 Activate Windows Instructions: 4.23972 3.48685 4.16987 (a) What is the nature of this lease to XYZ Company? Why? (b) Prepare an amortization schedule through the years 2018 and 2019 that would be suitable for the lessee (c) Prepare all of the journal entries for the lessee for 2018 and 2019 to record the lease agreement, the lease payments, and all expenses related to this lease Assume the lessee's annual accounting period ends on December 31 For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BIUS Paragraph Arial 14px A 24X DELL Activate Windows