On December 31, 2018, Rhone-Metro Industries leased equipment to Western Soya Co. for a four-year period ending December 31, 2022, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost Rhone-Metro $578,386 and has an expected useful life of six years. Its normal sales price is $578,386. The lessee-guaranteed residual value at December 31, 2022, is $30,000. Equal payments under the lease are $160,000 and are due on December 31 of each year. The first payment was made on December 31, 2018. Western Soyas incremental borrowing rate is 12%. Western Soya knows the interest rate implicit in the lease payments is 10%. Both companies use straight-line depreciation. Use (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. Show how Rhone-Metro calculated the $160,000 annual lease payments. 2. How should this lease be classified (a) by Western Soya Co. (the lessee) and (b) by Rhone-Metro Industries (the lessor)? 3. Prepare the appropriate entries for both Western Soya Co. and Rhone-Metro on December 31, 2018. 4. Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee and the lessor. 5. Prepare all appropriate entries for both Western Soya and Rhone-Metro on December 31, 2019 (the second lease payment and depreciation). 6. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2022 assuming the equipment is returned to Rhone-Metro and the actual residual value on that date is $1,500.

I only need Required 5 and 6 for Lessor and Lessee answered.

Required 1 Required 2 Required 3 lessee Required 3 lessor Required 4 lessor Required 4 lessee Required 5 lessee Required 5 lessor Required 6 lessee Required 6 lessor Prepare all appropriate entries for Western Soya on December 31, 2019 (the second lease payment and depreciation). (If no entry i required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record cash payment. Note: Enter debits before credits. General Journal Debit Credit Date December 31, 2019 Record entry Clear entry View general journal Required 1 Required 2 Required 3 lessee Required 3 Required 4 lessor lessor Required 4 lessee Required 5 lessee Required 5 lessor Required 6 lessee Required 6 lessor Prepare all appropriate entries for Western Soya on December 31, 2019 (the second lease payment and depreciation). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet