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Problem 11 I Facts: Lessee and Lessor execute lease agreement on January 1, 2020. Fair market value of leased asset at inception of lease is $900,000. Estimated residual value of asset at lease termination is $270,000 of which Lessee guarantees $270,000. Leased asset is carried at a book value of $900,000 in Lessor's accounting records in the Equipment general ledger account. The initial lease term is 7 years. Annual lease payments of $162,027 are made on December 31st of each year. In addition, Lessee is required to make an up-front payment of S162,027 at the inception of the lease. Lessee's incremental borrowing rate is 13%. Lessor's implicit rate is 14% and this rate is unknown by the Lessee. The remaining economic life of the asset is 10 years. The age of the asset is 0 years at lease inception. The lease contract specifies that at end of the initial lease term the Lessee has the option to renew the lease for another 3 years with the same lease payment terms. At incention of the lease, it was NOT reasonably certain that at the end of the initial lease term the Lessee will extend the lease pursuant to the extension opt. Required: 1 Answers related to Lessee: 2 Lessee's classification of lease: enter for operating lease or 1 for financing lease 3 Lessee's balance in Right-of-Use asset account at end of day 1/1/2020 after all entries related to 4 the transaction have been recorded 5 Lessee's balance in Right-of-Use asset account at 12/31/2020 after all end-of-year adjusting 6 entries have been made. 17 Lessee's balance in Right-of-Use asset account at 12/31/2021 after all end-of-year adjusting 8 entries have been made. 9 Lessee's balance in Lease Payableliability account at end of day 1/1/2020 after all entries 10 related to the lease have been recorded 1 1 Lessee's balance in Lease Payable liability account at 12/31/2020 after all entries related to the 12 lease have been recorded 13 Lessee's balance in Lease Payable liability account at 12/31/2021 after all entries related to the 14 lease have been recorded 15 16 Lessee's interest expense recognized for year 2020 17 18 Lessee's interest expense recognized for year 2021 19 20 Lessee's amortization expense recognized for year 2020 21 22 Lessee's amortization expense recognized for year 2021 23 1