K26 X Net Income ALB C D 32 Sharke Inc. was incorporated in 2017 to operate as a computer software service firm with an accounting fiscal 33 year ending July 31. Sharke's primary product is an on-line inventory-control system, its customers pay a 34 fixed fee plus usage charges for using the system. 38 36 On August 1, 2019, Sharke leased a large computer system from the manufacturer. The lease terms are shown 37 below: Annual lease payment $ 62,500.00 paid at the beginning of the year Date of first payment Aug. 1 2019 Lease term 8 years from date of first payment Implied interest rate in the contract Depreciation method Straight-line Bargain purchase option $ 6,000.00 to be exercised at the end of the 5th year Expected service life of the computer 8 years 57 This lease is to be accounted for as a finance lease. Following is a schedule of the present value 47 factors (both present value of $1 and present value of annuities due). 5% Present value of Annuity Due for 5yrs. Present value of Annuity Due for 8yrs. Present value of $1 for 5 yrs. Present value of $1 for 8 yrs. 4.38721 6.38929 0.71299 0 58201 454595 6.78637 0.78353 0.67684 Required 1 Identify the criteria for determining finance leases. 2. Prepare an amortization schedule for this lease agreement 3. Prepare, in general journal form, all entries Sharke should make in its accounting records for the first two fiscal years relating to this lease