Sarasota Corporation entered into a lease agreement on January 1, 2020, to provide Ivanhoe Company with a piece of machinery. The terms of the lease agreement were as follows.

1.		The lease is to be for 3 years with rental payments of $9,066 to be made at the beginning of each year.
2.		The machinery has a fair value of $61,000, a book value of $46,800, an end-of-life salvage value of $0, and an economic life of 8 years.
3.		At the end of the lease term, both parties expect the machinery to have a residual value of $39,200, none of which is guaranteed.
4.		The lease does not transfer ownership at the end of the lease term, does not have a bargain purchase option, and the asset is not of a specialized nature.
5.		The implicit rate is 6%, which is known by Ivanhoe.
6.		Collectibility of the payments is probable.
7.		Assume that the lessor uses straight-line depreciation.

(a) Evaluate the criteria for classification of the lease, and describe the nature of the lease. For the lessee, it is a select a type of lease ___________ , and for the lessor, it is a select a type of lease ______________. (Options: operating lease / sales-type lease / finance lease)

b. Prepare the amortization schedules Ivanhoe will use over the lease term.

c. Prepare the 2020 journal entries for Ivanhoe.

d. Prepare the 2020 journal entries for Sarasota.