Rhone-Metro industries manufactures equipment that is soid or leased. On December 31,2021 , Rhone-Metro leased equipment to Western Soya Co. for a four-year period ending December 31, 2025, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost $650,000 to manufacture and has an expected useful life of six years. Its normal sales price is $707,845. The expected residual value of $29,000 at December 31,2025 , is not guaranteed. Equal payments under the lease are $206,000 (including $6,000 maintenance costs) and are due on December 31 of each year. The first payment was made on December 31,2021 . Westem Soya's incremental borrowing rate is 14%. Western Soya knows the interest rate implicit in the lease payments is 11%. Both companles use straight-ine depreciation (EV of $1, PV of $1. FVA of \$1. PVA of $1, EVAD of $1 and PVAD of $1 ) (Use appropriate factor(s) from the tables provided.) Required: 1. Show how Rhone-Metro calculated the $206,000 annual lease payments 2. How should this lease be classified (a) by Western Soya Co. (the lessee) and (b) by Rhone-Metro industries (the lessor)? 3. Prepare the appropriate entries for both Western Soya Co. and Rhone-Metro on December 31,2021 . 4. Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee and the lessor. 5. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31,2022 (the second lease payment and amortization) 6. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2025, assuming the equipment is retumed to Rhone-Metro and the actual residual value on that date is $2,000. Complete this question by entering your answers in the tabs below. Show how Rhone-Metro calculated the $206,000 annual fease payments. (Round your intermediate and final answers to nearest whole dollar.)