Interstate Automobiles Corporation leased 40 vans to VIP Transport under a four-year noncancelable lease on January 1, 2016. Information concerning the lease and the vans follows: Equal annual lease payments of $300,000 are due on January 1, 2016. and thereafter on December 31 each year. The first payment was made January 1. 2016 Interstate's implicit interest rate is 10% and known by VIP VIP has the option to purchase all of the vans at the end of the lease for a total of $290,000 The vans' estimated residual value is $300,000 at the end of the lease term and $50,000 at the end of 7 years the estimated life of each van. VIP estimates the fair value of the vans to be $1, 240.000. Interstate's cost was $1,050,000. VIP's incremental borrowing rate is 11% VIP will pay the executory costs (maintenance, insurance, and other fees not included in the annual lease payments) of $1,000 per year The depreciation method is straight-line The collectibility of the lease payments is reasonably predictable, and there are no important cost uncertainties Specifically, you should address: a Identify potential advantages to VIP of leasing the vans rather than purchasing them b How should the lease be classified by VIP? by Interstate? Regardless of your response to previous requirements, suppose VIP recorded the lease on January 1, 2016. as a capital lease in the amount of $1,100,000 What would be the appropriate journal entries related to the capital lease for the second lease payment on December 31, 2016