PART A OPTIONS: FINANCE LEASE, OPERATING LEASE, SALES-TYPE LEASE

Please use the following options for the rest of the drop downs:

CASH, INITIAL DIRECT COST, INVENTORY, PREPAID MAINTENANCE EXPENSE, EQUIPMENT, ACCUMULATED DEPRECIATION, LEASE RECEIVABLE, RIGHT-OF-USE ASSET, ACCRUED LEGAL EXPENSE, DEFERRED LEASE REVENUE, DEPOSIT LIABILITY, LEASE INCENTIVE PAYABLE, LEASE LIABILITY, SALES REVENUE, INTEREST REVENUE, LEASE REVENUE, COST OF GOODS SOLD, AMORTIZATION EXPENSE, INTEREST EXPENSE, LEASE EXPENSE, LOSS ON LEASE, SELLING EXPENSE

Thank you!

Reporting Operating Lease-Lessee On January 1, 2020, Lessee Inc. leased equipment at an annual payment of $85,099 payable at the beginning of each year for 4 years. The equipment had a fair value of $400,000, a book value of $375,000, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of 8 years and an estimated residual value of $125,000, not guaranteed by the lessee. Lessor's implicit rate is 7.5%, which is unknown to the lessee. The lessee's incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease. a. How would Lessee Inc. classify the lease? Amortization Schedule of Lease Liability Amortization Schedule of Right-of-Use Asset Journal Entries b. Prepare an amortization schedule of the lease liability. Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Note: Include any net rounding difference to Lease Liability in the Interest on Liability amount for Jan. 1, 2027. Interest Reduction of on Liability Lease Liability Lease Liability $ $ $ Lease Date Payment Jan. 1. 2020 Jan. 1.2020 $ Jan 1, 2021 Jan. 1.2022 Jan. 1, 2023 Total $ $ $ C. Prepare an amortization schedule of the right-of-use asset. Straight-Line Interest Amortization of Right-of-Use Date Expense on Liability Right-of-Use Asset Asset Jan. 1. 2020 $ Year 2020 $ $ $ Year 2021 Year 2022 Year 2023 Total $ $ $ $ $ d. Prepare the entries for Lessee Inc. for the years 2020 and 2021, assuming Lessee Inc.'s accounting year ends December Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round your answers to the nearest whole dollar. Account Name Dr. Cr. Date Jan. 1.2020 To record lease liability and right-of-use asset Jan. 1, 2020 > To record lease payment Dec. 31, 2020 To record lease expense Jan. 1. 2021 . To record lease payment Dec. 31, 2021 > > > To record lease expense