Recording Finance Lease, Unguaranteed Residual, Initial Direct Lease Costs-Lessee On January 1, 2020, Alex Company signed a 5-year lease contract for equipment with Abel Company. The equipment had a normal selling price of $44,000 and an estimated useful life of 6 years. Five annual payments of $9,452 are payable by Abel on January 1, beginning in 2020. The asset reverts to Alex at the end of the lease term, December 31, 2024, and is estimated to have an unguaranteed residual value on that date of $2,400. Alex's implicit interest rate is 6%, which is known to Abel. Abel also paid legal fees in the execution of the lease of $1,440 on January 1, 2020. a. How would Abel Company classify the lease? Finance Lease Amortization Schedule Journal Entries b. Prepare an amortization schedule of the lease liability. Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Date Jan. 1, 2020 Lease Payment Interest Reduction of on Liability Lease Liability Lease Liability $ 42,203 Jan. 1, 2020 $ Jan. 1, 2021 9,452 0 $ 9,452 1,965 9,452 7,487 32,751 25,264 Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Lease Interest Reduction of Date Jan. 1, 2020 Payment on Liability Lease Liability Lease Liability $ 42,203 Jan. 1, 2020 $ 9,452 $ 0 $ 9,452 32,751 Jan. 1, 2021 9,452 1,965 7,487 25,264 Jan. 1, 2022 9,452 1,516 7,936 17,328 Jan. 1, 2023 9,452 1,040 8,412 8,916 Jan. 1, 2024 9,452 534 8,916 0 Total $ 47,260 $ 5,055 $ 42,203 Check Note: Round your answers to the nearest whole dollar. Note: List multiple debits or credits (when applicable) in alphabetical order. Date Account Name Jan. 1, 2020 Right-of-Use Asset Cash Lease Liability Dr. Cr. 0 x 0 0 0 x 0 x To record lease liability and right-of-use asset Jan. 1, 2020 Lease Liability 9,452 Cash 0 > 0 9,452 To record lease payment Dec. 31, 2020 Interest Expense Lease Liability To record interest Dec. 31, 2020 Amortization Expense Right-of-Use Asset To record amortization 1,965 0 > > 0 x 0 < 0 1,965 0 > 0 x