Reporting Operating Lease-Lessee On January 1, 2020, Lessee Inc. Teased equipment at an annual payment of $85,099 payable at the beginning of each year for 4 years. The equipment had a fair value of $400,000, a book value of $375,000, 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 $125,000, 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 Lease Interest Reduction of Payment on Liability Lease Liability Lease Liability $ 0 x $ 27,841 * $ OX 0 x OX OX 0 x OX Jan. 1, 2020 Jan. 1, 2020 $ Jan. 1, 2021 Jan. 1, 2022 Jan. 1, 2023 Total $ Ox 0 x OX Ox OX 0 x 0 0 x $ 0 X $ OX 1