On December 31, 2024, Yard Art Landscaping leased a delivery truck from Branch Motors. - Branch paid $39,000 for the truck. Its retail value is $49,355. - The lease agreement specified annual payments of $15,000 beginning December 31, 2024, the beginning of the lease, and at each December 31 through 2027. - Branch Motors' interest rate for determining payments was 10%. - At the end of the four-year lease term (December 31,2028 ) the truck was expected to be worth $11,000. - 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 $5,000. Yard Art's incremental borrowing rate is 9% and is unaware of Branch's implicit rate. A \$3,000 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 $15,000 lease payments. 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 $15,000 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, 2024. 7. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Yard Art. 8. Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Branch Motors. 9. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2025. 10. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2027 (the final lease payment). 11. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2028 (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. \begin{tabular}{|l|l|} \hline 1. This lease should be classified by Yard Art as a & Finance lease \\ \hline 2. The amount that Yard Art would record as a right-of-use asset and a lease liability would be & \\ \hline 3. This lease should be classified by Branch Motors as a & Sales-type lease \\ \hline 5. The amount that Branch Motors would record as sales revenue would be & \\ \hline \end{tabular} \begin{tabular}{|l|l|} \hline \multicolumn{2}{|c|}{ Lessor's calculation of lease payments } \\ \hline Amount to be recovered (fair value) & \\ \hline Less: Present value of the guaranteed residual value & $ \\ \hline Amount to be recovered through periodic lease payments & \\ \hline Lease payments at the beginning of each of the next four years & \\ \hline Add: Maintenance costs & $ \\ \hline Lease payments including Maintenance costs & 0 \\ \hline \end{tabular} Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the and final answers to nearest whole dollar. 1 Record the beginning of the lease for Yard Art. 2 Record the lease payment for Yard Art. 3 Record the beginning of the lease for Branch Motors. 4 Record cash received by Branch Motors. \begin{tabular}{|c|c|c|c|c|} \hline \multicolumn{5}{|c|}{ Lessee's Amortization Schedule } \\ \hline December 31 & Payments & \begin{tabular}{l} Effective \\ Interest \end{tabular} & \begin{tabular}{c} Decrease in \\ Balance \end{tabular} & \begin{tabular}{c} Outstanding \\ Balance \end{tabular} \\ \hline 2024 & & & & \\ \hline 2024 & & & & \\ \hline 2025 & & & & \\ \hline 2026 & & & & \\ \hline 2027 & & & & \\ \hline & $ & $ & $ & \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|} \hline \multicolumn{5}{|c|}{ Lessor's Amortization Schedule } \\ \hline December 31 & Payments & \begin{tabular}{l} Effective \\ Interest \end{tabular} & \begin{tabular}{c} Decrease in \\ Balance \end{tabular} & \begin{tabular}{c} Outstanding \\ Balance \end{tabular} \\ \hline \multicolumn{5}{|l|}{2024} \\ \hline \multicolumn{5}{|l|}{2024} \\ \hline \multicolumn{5}{|l|}{2025} \\ \hline \multicolumn{5}{|l|}{2026} \\ \hline \multicolumn{5}{|l|}{2027} \\ \hline \multicolumn{5}{|l|}{2028} \\ \hline & $ & $ & $ & \\ \hline \end{tabular} Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2025. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first and final answers to nearest whole dollar. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2027 (the final lease payment). Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round and final answers to nearest whole dollar. 1 Record the maintenance expense for Yard Art. 2 Record the lease payment for Yard Art. 3 Record amortization. 4 Record the cash received on lease by Branch Motors. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2028 (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. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermedia and final answers to nearest whole dollar. Show less 1 Record the maintenance expense for Yard Art. 2 Record amortization of the right-of-use asset for Yard Art. 3 Record the last payment on lease for Yard Art. 4 Record the last cash receipt on lease and settlement of lease by Branch Motors