Problem: PBC Corporation signed a lease agreement with MCA Company on January 1, 2018 to lease new equipment. The non-cancelable lease has a term of 10 years. There are no purchase or renewal options. PBC should make the annual lease payment of $70,000 at the end of each year. The fair value of the equipment at the inception of the lease is $540,521.45. The equipment has an economic life of 15 years. The lease term does not include a guaranteed residual value. The cost of the equipment to MCA Company is $500,000. PBC depreciates the equipment its currently owns on a straight-line basis. PBC Corporation's incremental borrowing rate is 6% and the MCA's 5% implicit rate in the lease is known to PBC Corporation. There no material uncertainties as to collection of the lease payments or future costs to be incurred under the lease. Required: 1. Classify the lease agreement for both the lessee and the lessor. Justify your answer. 2. Prepare the lessee's journal entries required for 2018, 2019 and 2020. Show all supporting calculations for the journal entries. 3. Prepare the lessor's journal entries required for 2018, 2019 and 2020. Show all supporting calculations for the journal entries