On January $1,2024,$ Franklin, Inc., leased equipment from Henderson Corporation under a six$-$year lease term. Henderson manufactured the equipment at a cost of $$450,000.$ The equipment's normal selling price is $$512,947.$ The terms of the lease require Franklin to make six equal annual payments of $$100,000,$ beginning on January $1,2024,$ and at December $31$ from $2024$ through $2028.$ At the end of the six$-$year lease term ending December $31,2029,$ the equipment will be returned to the lessor. It is expected to have a residual value of $$60,000.$ The $$60,000$ residual value is guaranteed by the lessee. The estimated useful life of the equipment is eight years. The lessor's implicit rate, which is known by the lessee is $10\%.$ The lessee's incremental borrowing rate is also $10\%.$ Both companies use straightline depreciation.

INSTRUCTIONS:

Show how Henderson Corporation calculated the $$100,000$ annual lease payments.

How should the lease be classified by $($a$)$ Franklin, Inc. $($the lessee$),$ and $($b$)$ Henderson Corporation $($the lessor$)?$ Explain your classifications.

Prepare the appropriate entries for both Franklin, Inc., and Henderson Corporation on January $1,2024.$

Prepare an amortization schedule$($s$)$ describing the pattern of interest over the lease term for the lessee and lessor.

Prepare the appropriate entries for both Franklin, Inc., and Henderson Corporation on December $31,2024($the second lease payment and amortization$).$

Prepare the appropriate entries for both Franklin, Inc., and Henderson Corporation on December $31,2029,$ assuming the equipment is returned to Henderson Corporation and the actual residual value on that date is $$45,000.$