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Problem 15-22 (Algo) Unguaranteed residual value; nonlease payments; sales-type lease (LO15-2, 15-6, 15-7] Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31,

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Problem 15-22 (Algo) Unguaranteed residual value; nonlease payments; sales-type lease (LO15-2, 15-6, 15-7] Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2021, Rhone-Metro 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 $580,000 to manufacture and has an expected useful life of six years. Its normal sales price is $628,656. The expected residual value of $40,000 at December 31, 2025, is not guaranteed. Equal payments under the lease are $174,000 (including $4,000 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 11%. Western Soya knows the interest rate implicit in the lease payments is 9%. Both companies use straight-line depreciation. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Show how Rhone-Metro calculated the $174,000 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 the 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 $1,200. Complete this question by entering your answers in the tabs below. Required 1 Required 3 Lessee Required 4 Required 2 Required 4 Lessee Required 3 Lessor Required 5 Lessee Required 5 Required 6 Lessor Lessee Required 6 Lessor Lessor Prepare the appropriate entries for Rhone-Metro on December 31, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar.) View transaction list Journal entry worksheet Record lease in the books of lessor. Note: Enter debits before credits. Date General Journal Debit Credit December 31, 2021 Record entry Clear entry View general journal

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