On January 1, 2014, company B leased equipment to company F. The following information pertains to the lease.

The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease

Equal rental payments are due on January 1 of each year, beginning in 2014

The fair value of the equipment on January 1, 2014 is $150,000, and its cost is $120,000

The equipment has an economic life of 8 years, with an unguaranteed residual value of $10,000. Company F depreciates all of its equipment on a straight-line basis

Company B set the annual rental to ensure an 11% rate of return. Company Fs incremental borrowing rate is 12%, and the implicit rate of the lessor is unknown.

Collectibility of lease payments is reasonably predictible, and no important uncertainties surround the amount of costs yet to be incurred by the lessor.

PLEASE SHOW YOUR WORK. This question is for intermediate accounting. Authors kieso, weygandt, and warfield

1. discuss the nature of the lease to company B and company F

2. Calculate the amount of annual rental payment

3. Prepare all the necessary journal entries for company F for 2014

4. Prepare all the necessary journal entries for company B for 2014.