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 $33,000 and an estimated useful life of 6 years. Five annual payments of $7,089 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 $1,800. Alex's implicit interest rate is 6%, which is known to Abel. Abel also paid legal fees in the execution of the lease of $1,080 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 Interest Reduction of on Liability Lease Liability Lease Liability Lease Payment Jan 1, 2020 31,653 Jan 1, 2020 s 7,0895 838 7,089 24,564 Jan 1, 2021 7,089 1,474 5.615 18,949 Jan 1, 2022 7,089 1,137 5,952 12,992 Jan 1, 2023 7,089 780- 6.309 6.688 Jan. 1, 2024 7,089 401- 6,688 0 Total S 35,445 S 3.7925 31,653 v Check 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 $33,000 and an estimated useful life of 6 years. Five annual payments of $7,089 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 $1,800. Alex's implicit interest rate is 6%, which is known to Abel. Abel also paid legal fees in the execution of the lease of $1,080 on January 1, 2020. a. How would Abel Company classify the lease? Finance Lease Amortization Schedule Journal Entries c. Prepare the entries for Abel Company for 2020. 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. 0x 0 06 31.653 7,089 Ov 7.089~ 1414 ~ 1474) To record lease liability and right-of-use asset Jan, 1, 2020 Lease Liability Cash To record lease payment Dec. 31, 2020 interest Expense Lease Liability To record interest Dec. 31, 2020 Amortization Experan Right.of Use Asses Torecard amortization Check 0 X 30 G