Micro Company leased equipment from Macro Leasing on January 2, 2021. Macro purchased the equipment at a cost of $300,000 equal to fair value of asset. The lease term is for 3 years and the useful life of equipment is 4 years with no residual value. Annual lease payments at January 2, each year. The interest rate is 8% on lease contract and its equal to lessee incremental borrowing.

Required: (10 points)

1.Classify the lease for the lessee view point. Calculate the annual lease payment and prepare a lease amortization schedule.

2. Prepare appropriate journal entries for Micro Company (Lessee) for 2021 and 2022. Assume a December 31 year-end.