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please provide explaination and work. I dont understand it. Problem 15-21 (Algo) Guaranteed residual value; sales-type lease (LO15-2, 15-5, 15-6] On December 31, 2021, Rhone-Metro

image text in transcribedplease provide explaination and work. I dont understand it.

Problem 15-21 (Algo) Guaranteed residual value; sales-type lease (LO15-2, 15-5, 15-6] On December 31, 2021, Rhone-Metro Industries leased equipment to Western Soya Co.for a four-year period ending December 31, 2025, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost Rhone-Metro $494.424 and has an expected useful life of six years. Its normal sales price is $494,424. The lessee-guaranteed residual value at December 31, 2025, is $40,000. Equal payments under the lease are $130,000 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 depreciation. Use (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use approprlate factor(s) from the tables provided.) Required: 1. Show how Rhone-Metro calculated the $130,000 annual lease payments. 2. How should this lease be classified (a) by Western Soya Co. (the lessee) and (b) by Rhone-Metro Industries (the lessor)? 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 all appropriate entries for both Western Soya and Rhone-Metro on December 31, 2022 (the second lease payment and amortization). 6. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2025 assuming the equipment is returned to Rhone-Metro and the actual residual value on that date is $1,000. Complete this question by entering your answers in the tabs below. Required 5 Required 6 Required 6 lessor lessee lessor Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 lessee lessor lessee lessor lessee Show how Rhone-Metro calculated the $130,000 annual lease payments. Guaranteed Residual Value Table or calculator function: Present Value Amount to be recovered Amount to be recovered through periodic lease payments Lease Payments Table or calculator function: n = Lease Payments Lease payments at the beginning of each of the next four years

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