On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $39,000 for the truck. Its retail value is $58,000. The lease agreement specified annual payments of $15,500 beginning December 31, 2018, the beginning of the lease, and at each December 31 through 2021. Branch Motors' interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2022) the truck was expected to be worth $16,000. The estimated useful life of the truck is five years with no salvage value. Both companies use straight-line amortization or depreciation. Yard Art guaranteed a residual value of $4,000. Yard Art's incremental borrowing rate is 9% and is unaware of Branch's implicit rate. A $2,000 per year maintenance agreement was arranged for the truck with an outside service firm. As an expedient, Branch Motors agreed to pay this fee. It is, however, reflected in the $15,500 lease payments. (FV of $1. PV of $1. FVA of $1, PVA of $1, FVAD of $1 an PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. How should this lease be classified by Yard Art Landscaping (the lessee)? 2. Calculate the amount Yard Art Landscaping would record as a right-of-use asset and a lease liability. 3. How should this lease be classified by Branch Motors (the lessor)? 4. Show how Branch Motors calculated the $15,500 annual lease payments. 5. Calculate the amount Branch Motors would record as sales revenue. 6. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2018. 7. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Yard Art. tization schedule that describes the pattern of interest revenue over the lease term for Branch Motors. late entries for both Yard Art and Branch Motors on December 31, 2019. 10. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2021 (the final lease payment). 11. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2022 (the end of the lease term), assuming the truck is returned to the lessor and the actual residual value of the truck was $2,000 on that date. Complete this question by entering your answers in the tabs below. Reg 1 to 3 and Reg 4 Reg 6 Reg 7 Req 8 Req9 Req 10 Req 11 1. How should this lease be classified by Yard Art Landscaping (the lessee)? 2. Calculate the amount Yard Art Landscaping would record as a right-of-use asset and a lease liability. 3. How should this lease be classified by Branch Motors (the lessor)? 5. Calculate the amount Branch Motors would record as sales revenue. (Round your intermediate and final answers to nearest whole dollar.) Show less Finance lease 1. This lease should be classified by Yard Art as a 2. The amount that Yard Art would record as a right-of-use asset and a lease liability would be 3. This lease should be classified by Branch Motors as a 5. The amount that Branch Motors would record as sales revenue would be Finance lease Complete this question by entering your answers in the tabs below. Reg 1 to 3 and Reg 4 Req 6 Reg 7 Req 8 Reg 9 Reg 10 Req 11 Show how Branch Motors calculated the $15,500 annual lease payments. (Round your intermediate and final answers to nearest whole dollar.) Lessor's calculation of lease payments Amount to be recovered (fair value) Less: Present value of the residual value Present value of the residual value Lease payments at the beginning of each of the next four years Add: Maintenance costs Lease payments including Maintenance costs $ 0 Complete this question by entering your answers in the tabs below. Reg 1 to 3 and Reg 4 Reg 6 Reg 7 Req 8 Reg 9 Reg 10 Reg 11 Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Yard Art. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) December 31 Lessee's Amortization Schedule Payments Effective Decrease in Interest Balance Outstanding Balance 2018 2019 2020 2021 0 Complete this question by entering your answers in the tabs below. Reg 1 to 3 and Reg 4 Reg 6 Reg 7 Req 8 Reg 9 Reg 10 Req 11 Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Branch Motors. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) Lessor's Amortization Schedule Payments Effective Decrease in Interest Balance December 31 Outstanding Balance 2018 2019 2020 2021 2022 $ 0 $ 0 $ On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $39,000 for the truck. Its retail value is $58,000. The lease agreement specified annual payments of $15,500 beginning December 31, 2018, the beginning of the lease, and at each December 31 through 2021. Branch Motors' interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2022) the truck was expected to be worth $16,000. The estimated useful life of the truck is five years with no salvage value. Both companies use straight-line amortization or depreciation. Yard Art guaranteed a residual value of $4,000. Yard Art's incremental borrowing rate is 9% and is unaware of Branch's implicit rate. A $2,000 per year maintenance agreement was arranged for the truck with an outside service firm. As an expedient, Branch Motors agreed to pay this fee. It is, however, reflected in the $15,500 lease payments. (FV of $1. PV of $1. FVA of $1, PVA of $1, FVAD of $1 an PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. How should this lease be classified by Yard Art Landscaping (the lessee)? 2. Calculate the amount Yard Art Landscaping would record as a right-of-use asset and a lease liability. 3. How should this lease be classified by Branch Motors (the lessor)? 4. Show how Branch Motors calculated the $15,500 annual lease payments. 5. Calculate the amount Branch Motors would record as sales revenue. 6. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2018. 7. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Yard Art. tization schedule that describes the pattern of interest revenue over the lease term for Branch Motors. late entries for both Yard Art and Branch Motors on December 31, 2019. 10. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2021 (the final lease payment). 11. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2022 (the end of the lease term), assuming the truck is returned to the lessor and the actual residual value of the truck was $2,000 on that date. Complete this question by entering your answers in the tabs below. Reg 1 to 3 and Reg 4 Reg 6 Reg 7 Req 8 Req9 Req 10 Req 11 1. How should this lease be classified by Yard Art Landscaping (the lessee)? 2. Calculate the amount Yard Art Landscaping would record as a right-of-use asset and a lease liability. 3. How should this lease be classified by Branch Motors (the lessor)? 5. Calculate the amount Branch Motors would record as sales revenue. (Round your intermediate and final answers to nearest whole dollar.) Show less Finance lease 1. This lease should be classified by Yard Art as a 2. The amount that Yard Art would record as a right-of-use asset and a lease liability would be 3. This lease should be classified by Branch Motors as a 5. The amount that Branch Motors would record as sales revenue would be Finance lease Complete this question by entering your answers in the tabs below. Reg 1 to 3 and Reg 4 Req 6 Reg 7 Req 8 Reg 9 Reg 10 Req 11 Show how Branch Motors calculated the $15,500 annual lease payments. (Round your intermediate and final answers to nearest whole dollar.) Lessor's calculation of lease payments Amount to be recovered (fair value) Less: Present value of the residual value Present value of the residual value Lease payments at the beginning of each of the next four years Add: Maintenance costs Lease payments including Maintenance costs $ 0 Complete this question by entering your answers in the tabs below. Reg 1 to 3 and Reg 4 Reg 6 Reg 7 Req 8 Reg 9 Reg 10 Reg 11 Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Yard Art. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) December 31 Lessee's Amortization Schedule Payments Effective Decrease in Interest Balance Outstanding Balance 2018 2019 2020 2021 0 Complete this question by entering your answers in the tabs below. Reg 1 to 3 and Reg 4 Reg 6 Reg 7 Req 8 Reg 9 Reg 10 Req 11 Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Branch Motors. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) Lessor's Amortization Schedule Payments Effective Decrease in Interest Balance December 31 Outstanding Balance 2018 2019 2020 2021 2022 $ 0 $ 0 $