Rhone$-$Metro Industries manufactures equipment that is sold or leased. On December $31,2024,$ Rhone$-$Metro leased equipment to Western Soya Company for a noncancelable stated lease term of four years ending December $31,2028,$ at which time possession of the leased asset will revert back to Rhone$-$Metro. Complete this question by entering your answers in the tabs below.

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Show how Rhone$-$Metro calculated the $$147,000$ annual lease payments.

Note: Round your intermediate and final answers to nearest whole dollar.

$\backslash$table$[[$BPO Price,$],[$Table or calculator function:,PV of $$1],[$n$=1,,3],[$i$=,8\%],[,$Present Value$],[$Amount to be recovered,$404,357],[,7,938],[$Amount to be recovered through periodic lease payments,$396,419],[$Lease Payments$],[$Table or calculator function:,PVAD of $$1],[$n$=,3],[$i$=,9\%],[,$Lease Payments$],[$Lease payments at the beginning of each of three years:,$145,282],[$Add: Maintenance costs,$4,000],[$Lease payments including nonlease components,$149,282]]$ Complete this question by entering your answers in the tabs below.

Prepare the appropriate entries for Western Soya Company on December $31,2024.$

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field. Round your intermediate

and final answers to nearest whole dollar. Complete this question by entering your answers in the tabs below.

Prepare an amortization schedule$($s$)$ describing the pattern of interest over the lease term for the lessee.

Note: Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values. Required $1$

Required $2$

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Lessor

Lessee

Lessor

Prepare the appropriate entries for Western Soya on December $31,2025($the second rent payment and amortization$).$

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.

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View journal entry worksheet

$\backslash$table$[[,$No$,$Date,General Journal,Debit,Credit$],[1,1,\backslash$table$[[$December $31,],[2025]],$Depreciation expense,$67,393,],[,,$Accumulated depreciation,,$67,393],[\backslash$gamma $,2,\backslash$table$[[\backslash$table$[[$December $31,],[2025]]]],$Maintenance expense,$4,000,],[,,$Prepaid maintenance expense,,$4,000],[\%,,,,,],[3,\backslash$table$[[\backslash$table$[[$December $31,],[2025]]]],$Interest expense,$20,726,],[,,$Lease payable,$128,556,],[,,$Prepaid maintenance expense,$4,000,],[,,$Cash,,$149,282]]$

IPrepare the appropriate entries for Rhone$-$Metro on December $30,2027,$ assuming the purchase option is exercised on that date.

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field. Round your intermediate

and final answers to nearest whole dollar.

Journal entry worksheet

Record cash received for bargain purchase in the books of lessor.

Note: Enter debits before credits.

The equipment cost $$320,000$ to manufacture and has an expected useful life of six years.

Its normal sales price is $$404,357.$

The expected residual value of $$18,000$ on December $31,2028,$ is not guaranteed.

Western Soya Company is reasonably certain to exercise a purchase option on December $30,2027,$ at an option price of $$8,000.$

Equal payments under the lease are $$147,000($including $$4,000$ annual maintenance costs$)$ and are due on December $31$ of each year.

The first payment was made on December $31,2024.$

Western Soya$$s incremental borrowing rate is $10\%.$

Western Soya knows the interest rate implicit in the lease payments is $8\%.$ Both companies use straight$-$line depreciation or amortization.

$[$Hint: A lease term ends for accounting purposes when an option becomes exercisable if it$$s expected to be exercised $($i$.$e$.,$ a BPO$).]$

Note: Use tables, Excel, or a financial calculator. $($FV of $$1,$ PV of $$1,$ FVA of $$1,$ PVA of $$1,$ FVAD of $$1$ and PVAD of $$1)$

Required:

Show how Rhone$-$Metro calculated the $$147,000$ annual lease payments.

How should this lease be classified $($a$)$ by Western Soya Company $($the lessee$)$ and $($b$)$ by Rhone$-$Metro Industries $($the lessor$)?$

Prepare the appropriate entries for both Western Soya Company and Rhone$-$Metro on December $31,2024.$

Prepare an amortization schedule$($s$)$ describing the pattern of interest over the lease term for the lessee and the lessor.

Prepare the appropriate entries for both Western Soya and Rhone$-$Metro on December $31,2025($the second rent payment and amortization$).$

Prepare the appropriate entries for both Western Soya and Rhone$-$Metro on December $30,2027,$ assuming the purchase option is exercised on that date.