Johnson Corporation leased computer equipment from Central Leasing Corporation on January 1, 2017. The equipment had an expected life of 6 years and a fair market value of $32,500. The lease had the following terms: a. Lease payments are $7,600 per year, paid each December 31. b. Insurance and maintenance costs included in the lease payments amount to $300 annually. C. At the end of the lease term, the computer equipment reverts to Central Leasing Corporation. d. The lease term is 5 years. Johnson has an incremental borrowing rate of 5% and has not been told of the interest rate implicit in the lease. Johnson uses straight-line depreciation, has a December 31 fiscal year-end and follows ASPE. Round each answer to the nearest dollar and nearest percent. Use the rounded answer in any following calculations. a) Is this a capital lease or an operating lease for Johnson? Present value = A transfer of title occurs = (select one) Present value versus fair value = Lease term versus economic life = Type of lease = (select one) b) Prepare an amortization schedule showing how the lease liability reduces over time. Interest Year Payment at 5% Principal Balance Jan 1, 2017 2017 2018 2019 2020 2021 c) Prepare journal entries for the first two years of the lease (for the lessee). Enter an appropriate description when entering the transactions in the journal. Dates must be entered in the format dd/mmm (ie. January 15 would be 15/Jan). General Journal Page 61 Date Account/Explanation PR Debit Credit 2017 + - + - + - 2018 + - d) How much interest expense would be recognized in the 2017 and 2018 fiscal years if the lease had been dated July 1, 2017? Interest expense, 2017 = Interest expense, 2018 =