Mid-South Auto Leasing leases vehicles to consumers. The attraction to customers is that the company can offer competitive prices due to volume buying and requires an interest rate implicit in the lease that is one percent below alternate methods of financing. On September 30, 2021, the company leased a delivery truck to a local florist, Anything Grows. The fiscal year for both companies ends December 31. The lease agreement specified quarterly payments of $3,500 beginning September 30, 2021, the beginning of the lease, and each quarter December 31, March 31, and June 30) through June 30, 2024 (three-year lease term). The florist had the option to purchase the truck on September 29, 2023, for $7,000 when it was expected to have a residual value of $16,000. The estimated useful life of the truck is four years. Mid-South Auto Leasing's quarterly interest rate for determining payments was 3% (approximately 12% annually). Mid-South paid $21,000 for the truck. Both companies use straight-line depreciation or amortization. Anything Grows' incremental interest rate is 12%. Hint: A lease term ends for accounting purposes when an option becomes exercisable if it's expected to be exercised (i.e., a BPO). (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Calculate the amount of selling profit that Mid-South would recognize in this sales-type lease. (Be careful to note that, although payments occur on the last calendar day of each quarter, since the first payment was at the beginning of the lease, payments represent an annuity due.) 2. Prepare the appropriate entries for Anything Grows and Mid-South on September 30, 2021. 3. Prepare an amortization schedule(s) describing the pattern of interest expense for Anything Grows and interest revenue for Mid- South Auto Leasing over the lease term. 4. Prepare the appropriate entries for Anything Grows and Mid-South Auto Leasing on December 31, 2021. 5. Prepare the appropriate entries for Anything Grows and Mid-South on September 29, 2023, assuming the purchase option was exercised on that date. Prepare the appropriate entries for Anything Grows and Mid-South on September 30, 2021. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Round your intermediate and final answers nearest whole dollar.) General Journal Debit Credit No 1 Date September 30, 202 Lease receivable Lease payable 2 September 30, 202 Lease payable 3,500 Cash 3,500 3 21,000 September 30, 202 Lease receivable Cost of goods sold Sales revenue Equipment 21,000 September 30, 202 Cash 3,500 Lease receivable 3,500 Required 1 Required 2 Required 3 Required 4 Required 5 Prepare the appropriate entries for Anything Grows and Mid-South Auto Leasing on December 31, 2021. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Round your intermediate ai final answers to nearest whole dollar.) No Date General Journal Debit Credit 1 1,927 December 31, 2021 Depreciation expense Accumulated depreciation 1.927 December 31, 2021 Interest expense 820 2,680 Lease payable Cash 3,500 3 December 31, 2021 Cash 3,500 Lease receivable 2,680 820 Interest revenue Required 1 Required 2 Required 3 Required 4 Required 5 Prepare the appropriate entries for Anything Grows and Mid-South on September 29, 2023, assuming the purchase option was exercised on that date. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar.) No Credit Date General Journal September 29, 202 Depreciation expense Accumulated depreciation Debit 5,781 | 1 5,781 2 September 29, 202 Interest expense Lease payable Cash 204 6,796 7,000 September 29, 202 Cash 7,000 6,796 Lease receivable Interest revenue