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Rhone-Metro Industries manufactures equipment that is sold or leased on December 31, 2021, Rhone-Metro leased equipment to Western Soya Co. for a noncancelable stated lease term of four years ending December 31, 2025, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost $280,000 to manufacture and has an expected useful life of six years. Its normal sales price is $322.446. The expected residual value of $40,000 at December 31, 2025, is not guaranteed, Western Soya Co. is reasonably certain to exercise a purchase option on December 30, 2024, at an option price of $10,000. Equal payments under the lease are $117,000 (including $4,000 annual maintenance costs) and are due on December 31 of each year. The first payment was made on December 31, 2021. Western Soya's incremental borrowing rate is 10%. Western Soya knows the interest rate implicit in the lease payments is 8%. Both companies use straight-line amortization Hint A lease term ends for accounting purposes when an option becomes exercisable if it's expected to be exercised (ie, a BPO). (EV of $1. PV of $1. EVA of $1, PVA of $1. EVAD of $1 and PVAD of S1) (Use appropriate factor(s) from the tables provided.) Required: 1. Show how Rhone-Metro calculated the $117.000 annual lease payments 2. How should this lease be classified (a) by Western Soya Co. (the lessee) and (b) by Rhone-Metro Industries (the lesson)? 3. Prepare the appropriate entries for both Western Soya Co. and Rhone-Metro on December 31, 2021. 4. Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee and the lessor 5. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2022 (the second rent payment and amortization) 6. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 30, 2024, assuming the purchase option is exercised on that date. Show how Rhone-Metro calculated the $117,000 annual lease payments. (Round your intermediate and final answers to nearest whole doliar.) BPO Price Table or calculator function: PV of $1 n 3 8% Present Value Amount to be recovered Less: Present value of the BPO price Amount to be recovered through periodic lease payments as Lease Payments Table or calculator function n Lease Payments Lease payments at the beginning of each of three years: Lease payments including executory costs Complete this question by entering your answers in the tabs below. Lessor Lessee Lessor Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required Required 5 Required 6 Required 6 Lessee Lessor Lessee How should this lease be classified (a) by Western Soya Co. (the lessee) and (b) by Rhone-Metro Industries (the lessor)? (Round your intermediate and final answers to nearest whole dollar) Western Soya Co Rhone-Metro Industries Juullai en y WUI Smeel Record lease in the books of lessee. Note: Enter debits before credits. General Journal Debit Credit Date December 31, 2021 Record entry Clear entry View general Journal Juurliai NILIY WUIRSI et 1 2 Record cash payment in the books of lessee. Note: Enter debits before credits General Journal Debit Credit Date December 31, 2021 aces Record entry Clear entry View general Journal Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Required 1 Required 2 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessor. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) Lease Amortization Schedule Effective Decrease in Outstanding Dec.31 Payments Interest Balance Balance 2021 2021 2022 2023 2024 0 0