Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to

eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $$2,000,000$ and

leased it to Mid$-$South Urologists Group, Inc., on January $1,2024.$

Lease Description:

Quarterly lease payments $$130,516-$beginning of each period

Lease term

$5$ years $(20$ quarters$)$

No residual value; no

purchase option

Economic life of lithotripter $5$ years

Implicit interest rate and $12\%$

lessee's incremental

borrowing rate

Fair value of asset $$2,000,000$

How should this lease be classified by Mid$-$South Urologists Group and by Physicians' Leasing?

Prepare appropriate entries for both Mid$-$South Urologists Group and Physicians' Leasing from

the beginning of the lease through the second rental payment on April $1,2024.$ Adjusting entries

are recorded at the end of each fiscal year $($December $31).$

Assume Mid$-$South Urologists Group leased the lithotripter directly from the manufacturer, Rand

Medical, which produced the machine at a cost of $$1\mathrm{.}7$ million. Prepare appropriate entries for

Rand Medical from the beginning of the lease through the second lease payment on April $1,$