P21-12B (L02,4) (Lessee-Lessor Entries, Balance Sheet Presentation, Finance and Sales-Type Lease) Gotham Enterprises and Marvel Inc, enter into an agreement that requires Marvel Inc. to build ten limousines to Gotham's specifications. Upon completion of the limousines, Gotham has agreed to lease them for a period of 8 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2017, and requires annual rental payments of $176,825 each January 1, starting January 1, 2017 Gotham's incremental borrowing rate is 9%. The implicit interest rate used by Marvel and known to Gotham is 5%. The total cost of building the limousines is $750,000. The economic life of the limousines is estimated to be 8 years, with residual value set at zero. Gotham depreciates similar equipment on a straight-line basis. At the end of the lease, Gotham assumes title to the limousines. Collectibility of the lease payments is probable. Instructions (Round all numbers to the nearest dollar.) (a) Discuss the nature of this lease transaction from the viewpoints of both lessee and lessor, (b) Prepare the journal entry or entries to record the transaction on January 1, 2017, on the books of Gotham (the lessee). (c) Prepare the journal entry or entries to record the transaction on January 1, 2017, on the books of Marvel (the lessor). (d) Prepare the journal entries for both the lessee and lessor to record the first rental payment on January 1, 2017 te) Prepare the journal entries for both the lessee and lessor to record any entries needed in connection with the lease at December 31, 2017. (Prepare a lease amortization schedule for 2 years.) () Show the items and amounts that would be reported on the balance sheet (not notes) at December 31, 2017, for both the lessee and the lessor. B) Assume that Gotham incurs legal fees related to the execution of the lease of $17.000. In addition, assume Gotham receives a lease incentive from Marvel of $28,000 to enter the lease. How will this affect your answer to part (b)