Reporting Operating Lease-Lessee On January 1, 2020, Lessee Inc. leased equipment at an annual payment of $238,277 payable at the beginning of each year for 4 years. The equipment had a fair value of $1,120,000, a book value of $1,050,000, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of 8 years and an estimated residual value of $350,000, not guaranteed by the lessee. Lessor's implicit rate is 7.5%, which is unknown to the lessee. The lessee's incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease. a. How would Lessee Inc. classify the lease? Operating Lease Amortization Schedule of Lease Liability Amortization Schedule of Right-of-Use Asset 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. Note: Include any net rounding difference to Lease Liability in the Interest on Liability amount for Jan. 1, 2027. Date Jan. 1, 2020 , Jan. 1, 2020 $ Jan 1, 2021 Jan. 1, 2022 Jan 1, 2023 Total $ Lease Interest Reduction of Payment on Liability Lease Liability Lease Liability 0 x 0 x $ 0 $ Ox 0X 0 x OX OX 0X 0X OX 0 X 0 X OX 0 X 0 X 0 Ox $ 0X $ 0x Reporting Operating Lease-Lessee On January 1, 2020, Lessee Inc. leased equipment at an annual payment of $238,277 payable at the beginning of each year for 4 years. The equipment had a fair value of $1,120,000, a book value of $1,050,000, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of 8 years and an estimated residual value of $350,000, not guaranteed by the lessee. Lessor's implicit rate is 7.5%, which is unknown to the lessee. The lessee's incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease. a. How would Lessee Inc. classify the lease? Operating Lease Amortization Schedule of Lease Liability Amortization Schedule of Right-of-Use Asset Journal Entries c. Prepare an amortization schedule of the right-of-use asset. Straight-Line Interest Amortization of Right-of-Use Date Expense on Liability Right-of-Use Asset Asset Jan. 1, 2020 $ OX Year 2020 $ 0 x $ Ox 0 x $ OX Ox Year 2021 OX OX 0 X OX Year 2022 0 x OX 0x OX Year 2023 OX O 0 x 0 Total $ 0X $ 0X $ 0X Reporting Operating Lease-Lessee On January 1, 2020, Lessee Inc. leased equipment at an annual payment of $238,277 payable at the beginning of each year for 4 years. The equipment had a fair value of $1,120,000, a book value of $1,050,000, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of 8 years and an estimated residual value of $350,000, not guaranteed by the lessee. Lessor's implicit rate is 7.5%, which is unknown to the lessee. The lessee's incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease. a. How would Lessee Inc. classify the lease? Operating Lease Amortization Schedule of Lease Liability Amortization Schedule of Right-of-Use Asset Journal Entries d. Prepare the entries for Lessee Inc. for the years 2020 and 2021, assuming Lessee Inc.'s accounting year ends December 31. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round your answers to the nearest whole dollar. Dr. Cr. OX 0 0 0 x 0 X O 0 OX Date Account Name Jan. 1, 2020 Right-of-Use Asset e Lease Liability To record lease liability and right-of-use asset Jan. 1, 2020 Lease Liability Cash To record lease payment Dec 31, 2020 Lease Expense Lease Liability Right-of-Use Asset To record lease expense Jan 1, 2021 Lease Liability Ox 0 0 0 X 0 07 OX OX 0 Cash OX OX 0 To record lease payment Dec 31, 2021 Lease Expense Lease Liability Right-of-Use Asset To record lease expense 0 OX 0 0x