Mac Leasing Company (lessor) and Ash Corporation (lessee) signed a four-year lease on January 1, 2020. The

underlying asset has an estimated life of six years, and the property reverts to Mac at the end of the lease term.

Lease payments of $11,923 are payable on January 1 of each year and were set to yield Mac a return of 8%, which

was known to Ash. The estimated residual value at the end of the lease term is $10,000 and is guaranteed by Ash

Corporation. Ash expects the estimated residual value at the end of the lease term to be $10,000. The lease con-

tains no purchase option.

Required

a. How would Ash Corporation classify the lease?

b. Prepare an amortization schedule of the lease liability.

c. Prepare the entries for Ash Corporation for 2020.

d. Let's now assume that Ash Corporation expects the estimated residual value at the end of the lease term to

be $3,500 instead. Prepare the entries for Ash Corporation for 2020