On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions:

	The lease is noncancelable and has a term of 8 years.
	The annual rentals are $30,400, payable at the beginning of each year.
	The interest rate implicit in the lease is 12%.
	Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for $1 at the end of the lease term, December 31, 2026.
	The cost of the equipment to the lessor is $145,500, and the fair value is approximately $169,100.
	Ballieu incurs no material initial direct costs.
	It is probable that Ballieu will collect the lease payments.
	Ballieu estimates that the fair value is expected to be significantly greater than $1 at the end of the lease term.

Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of $30,400 discounted at 12% is $169,138.21 (the $1 purchase option is ignored as immaterial).

Required:

1.	Next Level Identify the classification of the lease transaction from Ballieus point of view.
2.	Prepare all the journal entries for Ballieu for the years 2019 and 2020.