On January 1, 2022, Mountain Inc. Lessor leased to ABC Lessee some printing equipment. Mountain Inc. Lessor purchased the equipment specifically for leasing, and both their cost in the asset and the fair value of the equipment at the time of the lease agreement is $119,838. The lease agreement specifies 3 annual payments of $30,000 beginning January 1, 2022, the inception of the lease, and on each January 1st thereafter through 2024. The 3 year lease term ends on December 31, 2024. The lease does not contain a renewal or purchase option, and equipment reverts to the Lessor at the end of the 3 year period. The asset's expected residual value at the end of the lease term (3 years) is $48,000, unguaranteed by the Lessee. The expected useful life of the equipment is 5 years, and there is no expected residual value at the end of the useful life. Mountain Inc. Lessor routinely leases its inventory to customers. The implicit interest rate in their contracts is 9%, and ABC Lessee is aware of this rate. ABC Lessee's borrowing rate for similar transactions is 9%. Mountain Inc. Lessor depreciates their assets using the Straight Line method of depreciation. The equipment is not specialized and will have alternative future uses for the Lessee when returned. a. How will the lease be classified by the Lessor and Lessee? ABC Lessee c. b. What is the Fair Value of the lease contract (PV of lease payments) that ABC Lessee will capitalize on their Balance Sheet as a Right-of-Use Asset and Lease Liability? For ABC Lessee, prepare an amortization schedule using the effective interest method over the term of the lease. d. Prepare journal entries for ABC Lessee on the following dates: January 1, 2022 December 31, 2022 January 1, 2023 December 31, 2023 January 1, 2024 December 31, 2024 Mountain Inc. Lessor e. Prepare journal entries for ABC Equipment Lessor on the following dates: January 1, 2022 December 31, 2022 January 1, 2023 December 31, 2023 On January 1, 2022, Mountain Inc. Lessor leased to ABC Lessee some printing equipment. Mountain Inc. Lessor purchased the equipment specifically for leasing, and both their cost in the asset and the fair value of the equipment at the time of the lease agreement is $119,838. The lease agreement specifies 3 annual payments of $30,000 beginning January 1, 2022, the inception of the lease, and on each January 1st thereafter through 2024. The 3 year lease term ends on December 31, 2024. The lease does not contain a renewal or purchase option, and equipment reverts to the Lessor at the end of the 3 year period. The asset's expected residual value at the end of the lease term (3 years) is $48,000, unguaranteed by the Lessee. The expected useful life of the equipment is 5 years, and there is no expected residual value at the end of the useful life. Mountain Inc. Lessor routinely leases its inventory to customers. The implicit interest rate in their contracts is 9%, and ABC Lessee is aware of this rate. ABC Lessee's borrowing rate for similar transactions is 9%. Mountain Inc. Lessor depreciates their assets using the Straight Line method of depreciation. The equipment is not specialized and will have alternative future uses for the Lessee when returned. a. How will the lease be classified by the Lessor and Lessee? ABC Lessee c. b. What is the Fair Value of the lease contract (PV of lease payments) that ABC Lessee will capitalize on their Balance Sheet as a Right-of-Use Asset and Lease Liability? For ABC Lessee, prepare an amortization schedule using the effective interest method over the term of the lease. d. Prepare journal entries for ABC Lessee on the following dates: January 1, 2022 December 31, 2022 January 1, 2023 December 31, 2023 January 1, 2024 December 31, 2024 Mountain Inc. Lessor e. Prepare journal entries for ABC Equipment Lessor on the following dates: January 1, 2022 December 31, 2022 January 1, 2023 December 31, 2023