Instructions On January 1, 2019, 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 $28,900, payable at the beginning of each year. The interest rate implicit in the lease is 12%. Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for $1 at the end of the lease term, December 31, 2026. The cost of the equipment to the lessor is $144,000, and the fair value is approximately $160,800. Ballieu incurs no material initial direct costs. It is probable that Ballieu will collect the lease payments. Ballieu estimates that the fair value is expected to be significantly greater than $1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of $28,900 discounted at 12% is $160,792.58 (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. Give the reasons for your classification. 2. Prepare all the journal entries for Ballieu for the years 2019 and 2020. Chart of Accounts ASSETS 111 Cash 121 Accounts Receivable 122 Lease Receivable 123 Equipment Leased to Others 141 Inventory 152 Prepaid Insurance REVENUE 411 Sales Revenue 433 Interest Income EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 181 Equipment 198 Accumulated Depreciation 521 Salaries Expense LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Interest 261 Income Taxes Payable 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense EQUITY 311 Common Stock 331 Retained Earnings 2b. Prepare all the journal entries for Ballieu for the years 2019. General Journal Instructions How does grading work? 1 2 DATE Jan. 1 Lease Receivable Sales Revenue 3 1 Cash 5 6 7 8 ACCOUNT TITLE Cost of Goods Sold Equipment Leased to Others Dec. 31 Inventory Lease Receivable Interest Income GENERAL JOURNAL POST. REF. DEBIT PAGE 1 Score: 52/101 CREDIT Points: 10.3/20 2b. Prepare all the journal entries for Ballieu for the years 2020. How does grading work? 1 2 3 4 DATE Jan. 1 Cash Lease Receivable Dec. 31 Interest Income Lease Receivable GENERAL JOURNAL ACCOUNT TITLE POST. REF. DEBIT PAGE 1 Score: 33/51 CREDIT Points: 6.47/10