Lease facts:

$$ Date of lease $7/1/21$

$$ Term $3$ years $($expires $7/1/24)$

$$ Semi$-$annual lease payments of $$150,000$ every $7/1$ and $1/1$

$$ Lessee$$s incremental borrowing rate $5\%$

$$ Lessor$$s implicit rate of return $4\%($NOT known to lessee$)$

$$ Lessor$$s cost of asset leased $-$ $$600,000$

$$ Guaranteed residual value $-$ $$100,000($lessee believes fair value of the asset at the end of the lease will be greater than $$100,000).$

$$ Lessee and Lessor both have a December $31$st yearend.

$2.$ Assume the lease is treated as an operating lease:

a$.$ Prepare a table similar to the one distributed in class showing the $$interest$$ and $$depreciation$$ portions of annual lease expense for each year of the lease.

b$.$ Prepare all of the lessee$$s required journal entries for $2021$ and $2022$

c$.$ Prepare all of the lessor$$s required journal entries for $2021$ and $2022$