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Part VI: Lessee and Lessor on January 1, 2019 enter into a 4-year non-cancelable lease, with two renewal options of one year each, for equipment

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Part VI: Lessee and Lessor on January 1, 2019 enter into a 4-year non-cancelable lease, with two renewal options of one year each, for equipment having a useful life of 12 years. Lessee's incremental borrowing rate is 8% while Lessor's implicit rate is 5% and known to Lessee. The Lessee uses the straight-line method of depreciation. The lease contains the following provisions: 1. Annual rental payments of $20,000 payable at the beginning of each year, starting January 1, 2019. 2. A termination penalty assures the renewal of the lease for the additional two years. here is a guaranteed residual value at the end of the lease for $10,000. 4. The equipment has a cost of $110,000 and fair value of $114,052. Collectability of lease payments is probable. INSTRUCTIONS: (a) What kind of lease is this to the lessee and lessor? (b) Prepare the journal entries on the books of Lessee and Lessor through December 31, 2024. () Prepare the journal entries on the books of Lessce and Lessor through December 31, 2024, assuming that the residual value is unguaranteed. (d) What if there is a bargain purchase option of S10,000 at the end of the lease

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