January 1, 2019, Amity Company leases a crane to Baltimore Company. se contains the following terms and provisions: - The lease is noncancelable and has a term of 10 years. - The lease does not contain a renewal or bargain purchase option. - The annual rentals are $4,000, payable at the beginning of each year. - Baltimore agrees to pay all executory costs directly to a third party. - The cost of the equipment to the lessor is $24,925.00. The fair value of the equipment is $26,400. - Amity incurs initial direct costs of $1,415.09. - The interest rate implicit in the lease is 12%. - Amity expects to collect all lease payments from Baltimore. - Amity estimates that the fair value at the end of the lease term will be $3,190 and that the economic life of the crane is 12 years. This value is not guaranteed by Baltimore. Required: 1. Next Level What are initial direct costs? Discuss the accounting treatment of these costs. Are they treated in the same manner for (a) an operating lease, (b) a sales-type lease, and (c) a direct financing lease? 2. From the lessor's viewpoint, is the preceding lease a sales-type or direct financing lease? Give reasons to support your conclusion. 3. Prepare the joumal entries for Amity for 2019