On December 31, 2024, Rhone-Metro Industries leased equipment to Western Soya Company for a four-year period ending December 31, 2028, at which time possession of the leased asset will revert back to Rhone-Metro. - The equipment cost Rhone-Metro $698,796 and has an expected useful life of six years. - Its normal sales price is $698,796. - The lessee-guaranteed residual value on December 31,2028 , is $29,000. - Equal payments under the lease are $200,000 and are due on December 31 of each year. - The first payment was made on December 31, 2024. - Western Soya's incremental borrowing rate is 14%. - Western Soya knows the interest rate implicit in the lease payments is 12%. - Both companies use straight-line depreciation or amortization. Note: Use tables, Excel, or a financial calculator. Use (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1 ) Required: 1. Show how Rhone-Metro calculated the $200,000 annual lease payments. 2. How should this lease be classified (a) by Western Soya Company (the lessee) and (b) by Rhone-Metro Industries (the lessor)? 3. Prepare the appropriate entries for both Western Soya Company and Rhone-Metro on December 31, 2024. 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 31,2025 (the second lease payment and amortization). 6. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31,2028 , assuming the equipment is returned to Rhone-Metro and the actual residual value on that date is $2,000. Prepare the appropriate entries for Western Soya Company on December 31, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account fi Prepare all appropriate entries for Western Soya on December 31, 2025 (the second lease payment and amortization). Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar. Prepare the appropriate entries for Western Soya on December 31,2028 assuming the equipment is returned to Rhone-Metro and the actual residual value on that date is $2,000. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar. Complete this question by entering your answers in the tabs below. Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee. Note: Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values
