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Question 4 of 6 4.09/5 View Policies Show Attempt History Current Attempt in Progress Ivanhoe Dairy leases its milicing equipment from Shamrock Finance Company under the following lease terms. 1. 2. 3. The lease term is 10 years, noncancelable, and requires equal rental payments of $29.400 due at the beginning of each year starting January 1, 2020. The equipment has a fair value at the commencement of the lease (January 1, 2020) of $222.184 and a cost of $231,000 on Shamrock Finance's books. It also has an estimated economic life of 15 years and an expected residual value of $14,100, though Ivanhoe Dairy has guaranteed a residual value of $19,700 to Shamrock Finance. The lease contains no renewal options, and the equipment reverts to Shamrock Finance upon termination of the lease. The equipment is not of a specialized use. Ivanhoe Dairy's incremental borrowing rate is 8% per year. The implicit rate is also 8%. Ivanhoe Dairy depreciates similar equipment that it owns on a straight-line basis. Collectibility of the payments is probable. 4. 5. 6. Cck here to view factor tables (a) Your answer is correct. Evaluate the criteria for classification of the lease, and describe the nature of the lease. In general, discuss how the lessee and lessor should account for the lease transaction For the lessce, it is a finance lease and for the lessor, it is a sales-type lease e Textbook and Media List of Accounts Attempts: 3 of 4 used Using multiple attempts will impact your score. 50% score reduction after attempt 3 (b) Your answer is partially correct. Prepare the journal entries for the lessee and lessor at January 1, 2020, and December 31, 2020 (the lessee's and lessor's year- end). Assume no reversing entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually If no entry is required, select "No Entry for the account titles and enter for the amounts. Round present value factor calculations to 5 decimal places.cg. 1.25125 and final answers to decimal places, eg. 5.250.) Debit Credit Account Titles and Explanation Lessee: Leased Equipment 222.184 Lease Liability 222.184 To record the lease.) Lease Liability 29,400 Cash 29,400 (To record lease payment.) Lessor: Lease Receivable 2221014 Equipment 222.184 (To record the lease.) Cash 29,400 Lease Receivable 29,400 (To record lease payment.) Lessee ] Interest Expense 15,423 Interest Payable 15,423 (To record interest.) Depreciation Expense 20,248 Accumulated Depreciation Leased Equipment 20,248 (To record amortization.) Lessor: ] Interest Receivable 15,423 Interest Revenue 15,423