Recording Entries for Finance Lease with Unguaranteed Residual Value-Lessee Lessor Corporation, a manufacturer of equipment, enters into a lease of specialized equipment with Lessee Corp. on January 1 of Year 1. Title to the asset remains with Lessor Corp. at the end of the lease. Lessee Corp. does not guarantee the residual value of the specialized equipment at the end of the lease term, and the lease contains no renewal or purchase options. The following information pertains to the lease. 5 years Lease term Economic life of the leased equipment Annual lease payments Payment date (first payment due at lease commencement) Fair value of the leased equipment Lessor Corp's carrying value of the leased equipment Rate implicit in the lease (known by lessee) Estimated fair value of the equipment at the end of the lease term Required 6 years $2,614 Annually on Jan. 1 $11,440 $9,900 10.03% a. Determine the classification of the lease for Lessee Corporation. $880 Lease Liability Schedule Journal Entries b. Prepare a schedule of the lease liability for the first two years of the lease term. Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule.