Instructions On January 1, 2016, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of 8 years. The annual rentals are $30,400, payable at the beginning of each year. The interest rate implicit in the lease is 12%. Anderson agrees to pay all executory costs and is given an option to buy the equipment for $1 at the end of the lease term, December 31, 2024. The cost of the equipment to the lessor is $145,500, and the fair retail value is approximately $169,100. The lessor incurs no material initial direct costs. The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. The lessor estimates that the fair value is expected to be significantly greater than $1 at the end of the lease term. The lessor calculates that the present value on January 1, 2016 of 8 annual payments in advance of $30,400 discounted at 12% is $169,138.21 (the $1 purchase option is ignored as immaterial). Required: 1. Next Level Identify the classification of the lease transaction from Ballieu's point of view. 2. Prepare all the journal entries for Ballieu for the years 2016 and 2017. ASSETS REVENUE 111 Cash 411 Sales Revenue 121 Accounts Receivable 431 Interest Revenue: Leases 122 Lease Receivable 141 Inventory EXPENSES 152 Prepaid Insurance 500 Cost of Asset Leased 181 Equipment 511 Insurance Expense 198 Accumulated Depreciation 512 Utilities Expense 521 Salaries Expense LIABILITIES 532 Bad Debt Expense 211 Accounts Payable 540 Interest Expense 231 Salaries Payable 541 Depreciation Expense 250 Unearned Interest 559 Miscellaneous Expenses 261 Income Taxes Payable 910 Income Tax Expense EQUITY 311 Common Stock 331 Retained Earnings All transactions on this page must be entered (except for post ref(s)) before you will receive Check My Work feedback. PAGE 2016 PAGE 2017 GENERAL JOURNAL Score: 23/169 DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2 3 4. 5 6 7 8 9 All transactions on this page must be entered (except for post ref(s)) before you will receive Check My Work feedback. PAGE 2016 PAGE 2017 GENERAL JOURNAL Score: 23/169 DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2. 3 4