Reporting Finance Lease, Guaranteed Residual-Lessee On the first day of its accounting year, January 1, 2020, Lessee Inc. leased a building at an annual payment of $138,848 to be paid at the beginning of each year for 10 years. The first payment was paid immediately. The building, which is new, cost $1,100,000 and has an estimated useful life of 12 years. The lessor's implicit rate is 6% and is known to Lessee Inc. The residual value of the building of $30,000 was guaranteed by Lessee Inc. who expects the residual value to approximate $20,000. Lessee Inc. incurred the following additional costs and received the following incentives pertaining to this lease: Paid legal fees of $1,000 related to the execution of the lease. Paid a fixed lease payment of $138,848 plus a $3,500 recurring payment to the lessor for hazard insurance on the building. Received a lease incentive of $1,500 to sign the lease. a. How would Lessee Inc. Classify the lease? Finance Lease Amortization Schedule Value of Right-of-Use Asset -- Journal Entries Value of Lease Liability 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, Note: Include any net rounding difference to Lease Liability in the Interest on Liability amount for Jan. 1,2030. Lease Payment Interest Reduction of on Liability Lease Liability Lease Liability $ Ox 0$ 0 % OX OX OX OX Ox OX DX OX OX OX OX Date Jan 1, 2020 Jan 1, 2020 S Jan 1, 2021 Jan, 1, 2022 Jan 1, 2023 Jan, 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan. 1. 2027 Jan, 1,2028 Jan, 1, 2029 Jan. 1, 2030 Total S OX ax OX Ox 0 x OX 0 % OK OX OX OX 0X Ox 0 x 0 x $ OX Check