Reporting Finance Lease, Purchase Option-Lessee On January 1 of Year 1, lessor Marcy and lessee Lenox contract for the lease of a machine for five payments of $3,500 each. The $3,500 payments are to be paid at the end of each year beginning on December 31 of Year 1 . They also agree that at the time of the fifth payment, for an added $3,000 purchase option payment, Lenox can buy the property. Lenox feasonably expects to exercise the purchase option as the amount is well under the expected fair value at that time. Lenox's incremental borrowing rate is 6% per year and Lenox is unaware of the implicit rate of the lease. The economic life of the asset is six years. Required a. How would Lenox classify the lease? b. Compute the value of the lease liability on January 1 of Year 1. - Note: Round your answer to the nearest whole dollar. c. Prepare a schedule of the lease liability for the first two years of the lease term. - Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. d. Prepare the entries for Lenox on (1) January 1 of Year 1, (2) December 31 of Year 1, and (3) December 31 of Year 2. - Note: Round your answers to the nearest whole dollar