Problem 120 (Part Level Submission) Merando Corporation leases a building to Fernetti, Inc. on January 1, 2017. The following facts pertain to the lease agreement. 1. The lease term is 10 years with equal annual rental payments of $51,800 at the end of each year 2. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature 3. The building has a fair value of $514,800, a book value to Merando of $327,800, and a useful life of 15 years 4. At the end of the lease term, Merando and Fernetti expect the residual value of the building to be $187,000, and this amount is guaranteed by Baden, Inc, a third party 5. Merando wants to earn a S% return on the lease, and collectability of the payments is probable. Describe the nature of this lease to both Merando and Fernetti. LINK TO TEXT Assume the rate of return to amortize the net lease receivable to zero is 13%, prepare the journal entries to record the entries for Heando for 2017 and 2010, (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Version 4.24.3 bley 2000-2018 obnyileyasons,Inc, All Rights Reserved. A Division of Johnwile!Sons.Inc