Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2021, Rhone-Metro leased equipment to Western Soya Co. for a noncancelable stated lease term of four years ending December 31, 2025, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost $360,000 to manufacture and has an expected useful life of six years. Its normal sales price is $424,925. The expected residual value of $22,000 at December 31, 2025, is not guaranteed. Western Soya Co. is reasonably certain to exercise a purchase option on December 30, 2024, at an option price of $8,000. Equal payments under the lease are $155,000 (including $6,000 annual maintenance costs) and are due on December 31 of each year. The first payment was made on December 31, 2021. Western Soya's incremental borrowing rate is 9%. Western Soya knows the interest rate implicit in the lease payments is 7%. Both companies use straight-line 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). (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Show how Rhone-Metro calculated the $155,000 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 rent payment and amortization) 6. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 30, 2024, assuming the purchase option is exercised on that date. Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Show how Rhone-Metro calculated the $155,000 annual lease payments. (Round your intermediate and final answers to nearest whole dollar.) BPO Price Table or calculator function: PV of $1 n = i = Present Value Amount to be recovered Amount to be recovered through periodic lease payments Lease Payments Table or calculator function: PVAD of $1 n = i = Lease Payments Lease payments at the beginning of each of three years: Add: Executory costs Lease payments including executory costs 6,000 Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Prepare the appropriate entries for Western Soya Co. on December 31, 2021. (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.). View transaction list View journal entry worksheet No General Journal Debit Credit Date December 31, 2021 1 Right-of-use asset Lease payable 2 December 31, 2021 Lease payable Prepaid maintenance expense Cash 6,000 Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Prepare the appropriate entries for Rhone-Metro on December 31, 2021. (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.). View transaction list View journal entry worksheet No General Journal Debit Credit Date December 31, 2021 1 Lease receivable Cost of goods sold Sales revenue Equipment 2 December 31, 2021 Cash 6,000 Maintenance fee payable Lease receivable Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.). Lease Amortization Schedule Effective Decrease in Payments Interest Balance Outstanding Balance Dec.31 2021 2021 2022 2023 2024 0 0 Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessor. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) Lease Amortization Schedule Effective Decrease in Payments Interest Balance Outstanding Balance Dec.31 2021 2021 2022 2023 2024 0 0 0 Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Prepare the appropriate entries for Western Soya Co. on December 31, 2022 (the second rent payment and amortization). (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.) View transaction list View journal entry worksheet No Debit Credit Date December 31, 2022 General Journal Amortization expense Right-of-use asset December 31, 2022 Maintenance expense 6,000 N Prepaid maintenance expense 6,000 December 31, 2022 Interest expense Lease payable Prepaid maintenance expense Cash Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required Lessee Lessor Lessee Lessor Lessee Lessor Required 6 Required 6 Lessee Lessor Prepare the appropriate entries for Rhone-Metro on December 31, 2022 (the second rent payment and amortization). (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.)............. View transaction list View journal entry worksheet No General Journal Debit Credit Date December 31, 2022 1 Cash 6,000 Maintenance fee payable Lease receivable Interest revenue Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Prepare the appropriate entries for Western Soya Co. on December 30, 2024, assuming the purchase option is exercised on that da (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.) View transaction list View journal entry worksheet No Debit Credit Date December 31, 2024 1 General Journal Amortization expense Right-of-use asset 2 December 31, 2024 Interest expense Lease payable Cash 3 December 31, 2024 Maintenance expense 6,000 Prepaid maintenance expense 6,000 4 December 31, 2024 Prepaid maintenance expense 6,000 Cash 6,000 5 December 31, 2024 Equipment Right-of-use asset Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2021, Rhone-Metro leased equipment to Western Soya Co. for a noncancelable stated lease term of four years ending December 31, 2025, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost $360,000 to manufacture and has an expected useful life of six years. Its normal sales price is $424,925. The expected residual value of $22,000 at December 31, 2025, is not guaranteed. Western Soya Co. is reasonably certain to exercise a purchase option on December 30, 2024, at an option price of $8,000. Equal payments under the lease are $155,000 (including $6,000 annual maintenance costs) and are due on December 31 of each year. The first payment was made on December 31, 2021. Western Soya's incremental borrowing rate is 9%. Western Soya knows the interest rate implicit in the lease payments is 7%. Both companies use straight-line 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). (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Show how Rhone-Metro calculated the $155,000 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 rent payment and amortization) 6. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 30, 2024, assuming the purchase option is exercised on that date. Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Show how Rhone-Metro calculated the $155,000 annual lease payments. (Round your intermediate and final answers to nearest whole dollar.) BPO Price Table or calculator function: PV of $1 n = i = Present Value Amount to be recovered Amount to be recovered through periodic lease payments Lease Payments Table or calculator function: PVAD of $1 n = i = Lease Payments Lease payments at the beginning of each of three years: Add: Executory costs Lease payments including executory costs 6,000 Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Prepare the appropriate entries for Western Soya Co. on December 31, 2021. (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.). View transaction list View journal entry worksheet No General Journal Debit Credit Date December 31, 2021 1 Right-of-use asset Lease payable 2 December 31, 2021 Lease payable Prepaid maintenance expense Cash 6,000 Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Prepare the appropriate entries for Rhone-Metro on December 31, 2021. (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.). View transaction list View journal entry worksheet No General Journal Debit Credit Date December 31, 2021 1 Lease receivable Cost of goods sold Sales revenue Equipment 2 December 31, 2021 Cash 6,000 Maintenance fee payable Lease receivable Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.). Lease Amortization Schedule Effective Decrease in Payments Interest Balance Outstanding Balance Dec.31 2021 2021 2022 2023 2024 0 0 Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessor. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) Lease Amortization Schedule Effective Decrease in Payments Interest Balance Outstanding Balance Dec.31 2021 2021 2022 2023 2024 0 0 0 Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Prepare the appropriate entries for Western Soya Co. on December 31, 2022 (the second rent payment and amortization). (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.) View transaction list View journal entry worksheet No Debit Credit Date December 31, 2022 General Journal Amortization expense Right-of-use asset December 31, 2022 Maintenance expense 6,000 N Prepaid maintenance expense 6,000 December 31, 2022 Interest expense Lease payable Prepaid maintenance expense Cash Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required Lessee Lessor Lessee Lessor Lessee Lessor Required 6 Required 6 Lessee Lessor Prepare the appropriate entries for Rhone-Metro on December 31, 2022 (the second rent payment and amortization). (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.)............. View transaction list View journal entry worksheet No General Journal Debit Credit Date December 31, 2022 1 Cash 6,000 Maintenance fee payable Lease receivable Interest revenue Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Prepare the appropriate entries for Western Soya Co. on December 30, 2024, assuming the purchase option is exercised on that da (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.) View transaction list View journal entry worksheet No Debit Credit Date December 31, 2024 1 General Journal Amortization expense Right-of-use asset 2 December 31, 2024 Interest expense Lease payable Cash 3 December 31, 2024 Maintenance expense 6,000 Prepaid maintenance expense 6,000 4 December 31, 2024 Prepaid maintenance expense 6,000 Cash 6,000 5 December 31, 2024 Equipment Right-of-use asset