Problem VI ABC Company leased equipment from Lessor Company on January 1, 2020. ABC signed a three-year, non-cancelable lease. The equipment was estimated to be usable for seven years, and Lessor often leases similar equipment. The annual payments on the lease are $35,000, payable on January 1, 2020, 2021, and 2022. The equipment must be returned after the lease term is over. The fair value of the machine at the time of signing the lease contract is $150,000, the carrying value on the books of Lessor. There is no renewal option in the lease or purchase option. Lessor plans to lease out the equipment again when returned. The lease requires an unguaranteed residual of $58,000. ABC's incremental borrowing rate is 7%. Both firms have December 31 year ends. Lessor's implicit rate is 6%, and that rate is known to ABC. 1. What kind of lease is this to ABC? To Lessor? 2. Calculate any right-of-use asset and liability to ABC. Show your computations. 3. Create a lease amortization schedule in good form. 4. Prepare journal entries for the three years for both ABC and Lessor