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Black Company , as lessee , enters into a lease agreement with Gray Corporation , the lesson on January 1 2013 - equipment . The following data are relevant to the lease agreement The term of the noncancelable lease is 5 years with no renewal option Payments of 593 090 are due on January each year The fair value of the equipment on January 1 2018 is $244 483 . The equipment has an economic life of 6 years with no salvage value . Black depreciates similar machinery it owns on the straight line has The lesser pays executory costs for property taxes of $3 090 per year , which is included as part of its annual payments to Gray Corporation Black's incremental borrowing rate is 9 9 6 per year The lesser is aware that the lessor used an implicit the of 109% in computing the lease payments The lease is nonrenewable At termination of the lease , the equipment reverts to the lessee Collectability is reasonable assured and Gray Corporation tours no additional costs . truetions List the four criteria for a capital lease and indicate which are and which are not applicable for the capital lease showing all computations in good form Prepare an amortization table for the first two years of the less of the lease Prepare the journal entries on Black 's books for the first year of the lease Prepare the journal entries on Gray's books for the first year of the lesser