On $2$ January $20$X$5,$ Jayden Inc $($lessee$)$ entered into an agreement with Holstead Inc $($lessor$)$ to lease some equipment for five years. The terms of the agreement are as follows:

The fair value of the equipment at the inception of the lease is $$118,000.$ Additional direct costs relating to the lease amount to $$3,700.$

Lease payments are $$23,100$ per year, payable at the end of each lease year. The first payment will be due on $31$ December $20$X$4.$

The equipment$$s expected useful life is seven years.

The estimated unguaranteed fair value of the equipment at the end of the lease term is $$52,000.$

Jayden and Holstead have entered into a number of leasing arrangements in the past, with no issues.

Holstead applies ASPE.

$($PV of $$1,$ PVA of $$1,$ and PVAD of $$1.)($Use appropriate factor$($s$)$ from the tables provided.$)$

Required:

$1.$ Calculate the rate implicit in the lease for Holstead.

$2.$ How is this lease classified for Holstead Inc.

$3.$ Prepare the lease amortization table for Holstead.

$4.$ Prepare the $12$ journal entries for Holstead for $20$X$5$ to $20$X$9$ using the net method. Assume that in $20$X$9$ Holstead is able to sell the equipment for cash proceeds of $$47,300.($If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field.$)$