P17- 100 Recording entries for operating lease - Lessee (# 3/4) [25 pints] Lessor and lessee agreed to a noncancelable lease for which the following information is available. 1. The leased asset with a fair value of $25,000 was new at the inception of the lease term. 2. Lease term is four years starting January 1, 2020. 3. Estimated useful life of the leased asset is eight years. 4. On January 1, 2020, lessor and lessee estimated that the residual value of the leased asset will be $9,000 on the purchase option date and zero at the end of its useful life. The residual value is not guaranteed. 5. Lessee's incremental borrowing rate is 7%. 6. Lessor's interest rate implicit in the lease is 7%. 7. Purchase option price of leased asset exercisable on January 1, 2024, is $9,000. It is not reasonably certain that the lessee will purchase the asset at the end of the lease at the purchase option, which equals the esti- mated residual value. 8. Title to the leased asset is retained by the lessor unless the purchase option is exercised. 9. Sales value of leased asset on January 1, 2020, is $30,000. 10. Four annual lease payments will be made each January 1 during the lease term, and the first payment is due at inception of the lease term. Required a. Calculate the annual lease payment. b. Is this an operating lease or a finance lease to the lessee? c. Prepare a lease liability amortization schedule and right-of-use asset amortization schedule for the lessee. d. Provide all journal entries associated with this lease for the lessee for the years ended December 31, 2020. and 2021