Lease facts:

• Date of lease 6/1/19
• Term 3 years (expires 6/1/22)
• Semi-annual lease payments of $100,000 every 6/1 and 12/1
• Lessees incremental borrowing rate 6%
• Lessors implicit rate of return 5% (NOT known to lessee)
• Lessors cost of asset leased - $250,000
• Guaranteed residual value - $70,000 (lessee believes fair value of the asset at the end of the lease will be greater than $70,000).
• Lessee and Lessor both have a December 31^st yearend.

Requirements:

1. Assume the lease is treated as a finance lease:

1. Determine the present value of the lease payments
2. Prepare an amortization table for the lease payments for the lessee
3. Prepare all of the lessees required journal entries for 2019 and 2020
4. Determine the fair value of the lease from the lessors perspective
5. Prepare the lessors amortization table for this lease
6. Prepare all of the lessors required journal entries for 2019 and 2020