Ravis Rent$-$A$-$Car Company leases a car to Ira Reem, an employee, on January $1,2019.$ The term of the noncancelable lease is $4$ years. The following information about the lease is provided:

$1.$ Title to the car passes to Ira on the termination of the lease with no additional payment required by the lessee.

$2.$ The cost and fair value of the car is $$8,400.$ The car has an economic life of $5$ years.

$3.$ The interest rate implicit in the lease is $10\%.$

$4.$ It is probable that Ravis will collect the lease payments.

$5.$ Equal annual lease payments are due at the end of each year.

Required:

$1.$ Next Level What type of lease is this to Ravis Rent$-$A$-$Car Company? Why?

$2.$ Prepare a table summarizing the lease receipts and interest income earned by the Ravis Rent$-$A$-$Car for the $4-$year lease term.

$3.$ Prepare the journal entries for $2019$ and $2020$ to record the lease agreement, the lease receipts, and the recognition of income on the books of Ravis Rent$-$A$-$Car.

Chart of Accounts

ASSETS

$111$ Cash

$121$ Accounts Receivable

$122$ Lease Receivable

$123$ Equipment Leased to Others

$141$ Inventory

$152$ Prepaid Insurance

LIABILITIES

$211$ Accounts Payable

$231$ Salaries Payable

$250$ Unearned Interest

$261$ Income Taxes Payable

EQUITY

$311$ Common Stock

$331$ Retained Earnings

REVENUE

$411$ Sales Revenue

$433$ Interest Income

EXPENSES

$500$ Cost of Goods Sold

$511$ Insurance Expense

$512$ Utilities Expense

$521$ Salaries Expense

$532$ Bad Debt Expense

$540$ Interest Expense

$559$ Miscellaneous Expenses

$910$ Income Tax Expense