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Magic Company manufactures copier machines at a cost of $600,000 per copier. On January 1, 2020, Acme, Inc. leased a copier from Magic Company. The

image text in transcribed Magic Company manufactures copier machines at a cost of $600,000 per copier. On January 1, 2020, Acme, Inc. leased a copier from Magic Company. The terms of the lease are as follows: Rental payments Lease term Residual value Bargain Purchase Option Economic life of copier machine Implicit interest rate Fair value of asset at the beginning of each $43,641 quarter 5 years (20 quarters) $33,684 n/a 6 years 8% (also lessee's incremental borrowing rate $750,654 Required: 1. How should this lease be classified by Acme, Inc. and by Magic Company? 2. Prepare an amortization schedule for both Acme, Inc. and Magic Company covering January 1, April 1, and July 1, 2020 2. Prepare all appropriate journal entries for both Acme Inc. and Magic Company from the beginning of the lease through the second rental payment on April 1, 2020. Depreciation and amortization are recorded at the end of each quarter

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