Reporting Finance Lease, Guaranteed Residual Lessee Mac Leasing Company (lessor) and Ash Corporation (lessee) signed a...

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Reporting Finance Lease, Guaranteed Residual Lessee Mac Leasing Company (lessor) and Ash Corporation (lessee) signed a four-year lease on January 1 of Year 1. The underlying asset has an estimated life of six years and a fair value of $175,000, and the property reverts to Mac at the end of the lease term. Lease payments of $41,731 are payable on January 1 of each year beginning at the lease commencement and are set to yield Mac a return of 8%, which is known to Ash. The estimated residual value at the end of the lease term is $35,000 and is guaranteed by Ash Corporation. Ash expects the residual value at the end of the lease term to be $35,000. The lease contains no purchase option. Required a. How would Ash Corporation classify the lease? b. What is the lease liability balance on January 1, the lease commencement date? Note: Round your answer to the nearest whole dollar. $ 0 Estimated Residual = Guaranteed Residual Estimated Residual < Guaranteed Residual c. Prepare the entries for Ash Corporation on January 1 and December 31 of Year 1. Note: Round your answers to the nearest whole dollar. Date Account Name Dr. Cr. Jan. 1, Year 1 0 0 0 0 To record asset and liability related to lease Jan. 1, Year 11 0 0 0 0 To record lease payment Dec. 31, Year 1 To record interest Dec. 31, Year 1 > > > > 0 0 0 0 0 0 0 0 To record amortization Reporting Finance Lease, Guaranteed Residual Lessee Mac Leasing Company (lessor) and Ash Corporation (lessee) signed a four-year lease on January 1 of Year 1. The underlying asset has an estimated life of six years and a fair value of $175,000, and the property reverts to Mac at the end of the lease term. Lease payments of $41,731 are payable on January 1 of each year beginning at the lease commencement and are set to yield Mac a return of 8%, which is known to Ash. The estimated residual value at the end of the lease term is $35,000 and is guaranteed by Ash Corporation. Ash expects the residual value at the end of the lease term to be $35,000. The lease contains no purchase option. Required a. How would Ash Corporation classify the lease? b. What is the lease liability balance on January 1, the lease commencement date? Note: Round your answer to the nearest whole dollar. $ 0 Estimated Residual = Guaranteed Residual Estimated Residual < Guaranteed Residual c. Prepare the entries for Ash Corporation on January 1 and December 31 of Year 1. Note: Round your answers to the nearest whole dollar. Date Account Name Dr. Cr. Jan. 1, Year 1 0 0 0 0 To record asset and liability related to lease Jan. 1, Year 11 0 0 0 0 To record lease payment Dec. 31, Year 1 To record interest Dec. 31, Year 1 > > > > 0 0 0 0 0 0 0 0 To record amortization