Q1. On December 31, 2019, Venus Corp. (the lessee) leases equipment from Gemini Corp. (the lessor). The present value of the lease payments shown below are based on the lessee's incremental borrowing rate which is equal to the lessor's implicit rate. The first lease payment is at the inception of the lease on December 31, 2019. Note that the five lease payments are not all the same. The asset will revert to the lessor at the end of the lease on 12/31/2024. There is not a residual value guarantee. When necessary, assume straight-line amortization of leased assets. Other important facts about the lease follow: Inception of the lease Annual lease payments Lease term Economic life of leased equipment Expected RV at end of lease Expected RV after 8 years Lessor's cost of equipment 12/31/2019 See below 5 years 8 years $5,000 None $14,300 PV of annual lease payments PV of the residual value Total $13,065 $3,701 $16.766 Lessee Amortization Schedule (partially complete) Date Annual Lease Payments Interest Expense Reduction of Lease Payable Lease Payable 13,065 9,565 6,658 4,570 593 3,500 3,500 2,500 2,500 2,500 3,500 2,907 2,087 12/31/2019 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Total 413 14,500 Q1 (cont.) For the next five questions, assume the lease is a financing lease (sales-type). Show supporting calculations for every question. a. What is the lessee's annual amortization expense for the leased asset? b. To the nearest dollar, what is the lessee's interest expense for 2023? c. What is the balance of lessor's Lease Receivable on 1/1/2020? d. What is the amount of gross profit recognized by the lessor in 2019? e. What is the lessor's interest income for 2020? Q1 (cont.) For the remaining four questions, assume the lease is an operating lease. Show supporting calculations for every question. f. What is the total lease expense that will be recognized by the lessee for 2020? g. What is the dollar amount of lessee's amortization of the leased asset for 2020? h. What is the lessee's balance of the account, Leased Equipment at 12/31/2021? i. Make all entries required by the lessor for 12.31.2019 and 12/31/2020. 12/31/2019 12/31/2020 Q1. On December 31, 2019, Venus Corp. (the lessee) leases equipment from Gemini Corp. (the lessor). The present value of the lease payments shown below are based on the lessee's incremental borrowing rate which is equal to the lessor's implicit rate. The first lease payment is at the inception of the lease on December 31, 2019. Note that the five lease payments are not all the same. The asset will revert to the lessor at the end of the lease on 12/31/2024. There is not a residual value guarantee. When necessary, assume straight-line amortization of leased assets. Other important facts about the lease follow: Inception of the lease Annual lease payments Lease term Economic life of leased equipment Expected RV at end of lease Expected RV after 8 years Lessor's cost of equipment 12/31/2019 See below 5 years 8 years $5,000 None $14,300 PV of annual lease payments PV of the residual value Total $13,065 $3,701 $16.766 Lessee Amortization Schedule (partially complete) Date Annual Lease Payments Interest Expense Reduction of Lease Payable Lease Payable 13,065 9,565 6,658 4,570 593 3,500 3,500 2,500 2,500 2,500 3,500 2,907 2,087 12/31/2019 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Total 413 14,500 Q1 (cont.) For the next five questions, assume the lease is a financing lease (sales-type). Show supporting calculations for every question. a. What is the lessee's annual amortization expense for the leased asset? b. To the nearest dollar, what is the lessee's interest expense for 2023? c. What is the balance of lessor's Lease Receivable on 1/1/2020? d. What is the amount of gross profit recognized by the lessor in 2019? e. What is the lessor's interest income for 2020? Q1 (cont.) For the remaining four questions, assume the lease is an operating lease. Show supporting calculations for every question. f. What is the total lease expense that will be recognized by the lessee for 2020? g. What is the dollar amount of lessee's amortization of the leased asset for 2020? h. What is the lessee's balance of the account, Leased Equipment at 12/31/2021? i. Make all entries required by the lessor for 12.31.2019 and 12/31/2020. 12/31/2019 12/31/2020