On December 31, 2020, Maglietta Corporation signed a 10 year non cancelable lease for a machine. The terms of the lease called for Maglietta to make annual payments of $9,375 at the beginning of each year, starting December 31, 2020. The machine has an estimated useful life of 12 years and a $5,000 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Maglietta uses the straight-line method of depreciation for all its plants assets. Magliettas incremental borrowing rate is 6% and the lessors implicit rate is unknown.

A . What type of lease is this?

B. Compute the present value of the lease payments

C. Prepare all necessary journal entries for Maglietta for this lease through December 31, 2021.