Jetti Ltd., manufactures special jet engine turbines with an estimated economic life of 12 years and leases it to Montreal Airlines, Ltd., [MAL] for a period of 10 years commencing January 1, 2021. Both Jetti and MAL follow ASPE. The unguaranteed residual value at the end of the lease term is estimated to be $15,000. MAL will make annual payments of $25,000 at the beginning of each year and pay for all maintenance and insurance costs. Jetti incurred costs of $105,000 in manufacturing the equipment but is looking to make a profit on the sale of equipment. In addition, Jetti incurred $7000 in costs tied to negotiating and closing the lease. Jetti has determined that the collectability of the lease payments is reasonably predictable, that no additional costs will be incurred, and that the implicit interest rate is 8%. MAL has a borrowing rate of 8%. Assume for this question only, Jetti would consider leasing the equipment for 11 years if it could recover a normal selling price of $210,482. How much would Jetti charge the lessee annually for a 11-year lease? Assume the unguaranteed residual value at the end of 11 years would be $10,000, and that lease payments would be due at the start of each year. a. $25,861 b. $27,856 c. $27,300 d. $26,743 e. None of the above How should MAL classify this lease transaction? a. Classify as an operating lease b. Classify as a capital, sales type lease c. Classify as a capital, direct finance type lease d. Classify as a capital lease e. None of the above What is the amount of the initial obligation for MAL? a. $203,474 b. $167,752 c. $181,172 d. $188,120 e. None of the above The journal entry prepared by MAL at the commencement of the lease would be: a. Dr. Equipment under Lease, $188,120; Cr. Obligation Under Lease, $188,120 b. Dr. Equipment under Lease, $167,752; Cr. Obligation Under Lease, $167,752 c. Dr. Prepaid Equipment Rent, $181,172; Cr. Obligation Under Lease, $181,172 d. Dr. Prepaid Equipment Rent, $25,000; Cr. Cash, $25,000 e. None of the above The depreciation expense amount recorded by MAL on December 31, 2021 is: a. $15,098 b. $17,312 c. $18,117 d. $15,677 e. None of these answers. Assume for this question only, the residual value of $15,000 was guaranteed by MAL. The depreciation expense amount on December 31, 2021 recorded by MAL is: a. $15,098 b. $17,312 c. $18,117 d. $15,677 e. None of the above Assume for this question only, the residual value of $15,000 is replaced with a bargain purchase option of $15,000. The depreciation expense amount recorded by MAL on December 31, 2021 is: a. $15,312 b. $17,312 c. $18,117 d. $15,677 e. None of the above