rental payments at Sag nfee-year period he ement due on December 21 year, payable on Tessor Company manufactures Machine X. This machine has a fair market value of $150,000 as of January 1, Year 1. On January 1, Year 1, Lessor Company agrees to lease Model X to Lessee Company for the three-year period beginning on that date. The parties set the annual rental payments at $48,000 per year, payable on December 31 of each year, with the first rental payment due on December 31, Year 1. Per Lessor Company, Machine X has an expected useful life of five years. The interest rate applicable to this transaction is 8%. Straight line depreciation applies throughout the analysis. Lessor Com a fair market value on that dateres to lease Model Onerating lease analysis: For Problem #1, assume that this lease will be accounted for as an operating lease. 1. Show the accounting entries that Lessee Company (the lessee) will make on December 31 for each year of this operating lease. pace=150,000 Anual white golo life = 5yeo Amed lose payment = 45,000 Dr Rist expues 48000 er cash 48000 Capital lease analysis: For Problems #2--#3, assume that this lease will be accounted for as a capital lease. 2. First prepare an amortization schedule for this lease transaction i.e., Years 1, 2, and 3). 3. Show the accounting entries over the three years of this lease that Lessee Company (the lessee) will make if this lease is accounted for as a capital lease. a. Joumal entry to put the leased asset on the Lessee's Balance Sheet on January 1, Year One: b. Journal entry to record "Depreciation Expense" on December 31 of Years 1, 2, and 3 on the Lessee's financial statements: c. Journal entries to record the Lessee's lease payment on December 31 of each year of the lease: Year One: Year Two: Year Three