On January 2, 2021, Petronila Company leased several machines from Petrakos Corporation under a three-year lease agreement. The lease calls for semiannual payments of $15,000 each, payable on June 30 and December 31 of each year. The machines were acquired by Petrakos at a cost of $130,000 and are expected to have a useful life of 6 years with no expected residual value.

Required: 1. How Petronila classify this lease? and how Petrakoss classified it? 2. Prepare the appropriate journal entries only for the lessor from the inception of the lease through the end of 2021.