NEED HELP ANSWERING THIS HW QUESTION

Pronghorn Corporation leased equipment to Larkspur, Inc. on January 1, 2020. The lease agreement called for annual rental payments of $1,179 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $8,900, a book value of $6,900, and Pronghorn expects a residual value of $6,400 at the end of the lease term. Pronghorn set the lease payments with the intent of earning a 5% return, though Larkspur is unaware of the rate implicit in the lease and has an incremental borrowing rate of 7%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.

a) Determine the nature of the lease to both Pronghorn and Larkspur.

-The lease is a/an ___________ lease to Larkspur.

-The lease is a/an ___________ lease toPronghorn

b) all necessary journal entries for Larkspur in 2020.

\fDate Account Titles and Explanation Debit Credit (To record the lease) (To record lease payment)