On December $31,2021,$ Rhone$-$Metro Industries leased equipment to Western Soya Co$.$ for a four$-$year period ending December $31,2025,$ at which time possession of the leased asset will revert back to Rhone$-$Metro.

The equipment cost Rhone$-$Metro $$365,760$ and has an expected useful life of six years. Its normal sales price is $$365,760.$ The lessee$-$guaranteed residual value at December $31,2025,$ is $$25,000.$ Equal payments under the lease are $$100,000$ and are due on December $31$ of each year. The first payment was made on December $31,2021.$ Western Soya's incremental borrowing rate is $12\%.$ Western Soya knows the interest rate implicit in the lease payments is $10\%.$ Both companies use straight$-$line depreciation or amortization.

Required:

Show how Rhone$-$Metro calculated the $$100,000$ annual lease payments.

How should this lease be classified $($a$)$ by Western Soya Co$.($the lessee$)$ and $($b$)$ by Rhone$-$Metro Industries $($the lessor$)?$ Why?

Prepare the appropriate entries for both Western Soya Co$.$ and Rhone$-$Metro on December $31,2021.$

Prepare an amortization schedule$($s$)$ describing the pattern of interest over the lease term for the lessee and the lessor.

Prepare all appropriate entries for both Western Soya and Rhone$-$Metro on December $31,2022($the second lease payment and amortization$).$

Prepare the appropriate entries for both Western Soya and Rhone$-$Metro on December $31,2025,$ assuming the equipment is returned to Rhone$-$Metro and the actual residual value on that date is $$1,500.$