Marlin Industries enters into a lease agreement with Anemone Corporation on January 1, 2020 for fishing trawler. As per the agreement, Marlin Industries gets full use of the trawler for 4 years, at which time it will then revert back to Anemone. The trawler has an expected life of 6 years. Marlins incremental borrowing rate is 10% and Anemones implicit rate of return is 8%. Assume that the expected residual value is $50,000, the fair value of the trawler is $3,500,000 and the trawler cost Anemone $2,000,000 to build.

a. What is the annual lease payment that the lessor will charge on this investment? Assume that the residual value is guaranteed and the lease payments will occur on the first day of the year.

b. Record the required journal entry(ies) for the first year of the lease for the lessor. Date your journal entry(ies).

c. Record the payment on January 1, 2021 for the lessor.

d. What type of lease is this for the lessee? Provide evidence for your answer.

e. Record the first year of journal entry(ies) for the lessee. Date your journal entry(ies).