Scupper Farms, the lessee, and Tyrrell Equipment, the lessor, sign a lease agreement on January $1,2019,$ that provides for Scupper to lease a cultivator from Tyrrell. The lease terms, provisions, and other related events are as follows:

The lease is noncancelable and has a term of $6$ years.

The annual rentals are $$55,000$ payable at the beginning of each year.

Scupper agrees to pay all executory costs directly to a third party, which are expected to be $$1,100$ annually, including property taxes of $$500,$ insurance of $$350,$ and maintenance of $$250.$ These costs are paid each year on November $1.$

The cultivator has an estimated economic life of $6$ years.

Scupper guarantees a residual value of $$60,000$ at the end of $6$ years. Scupper believes it is probable that it will pay $$15,000$ cash as a result of this guarantee

The interest rate implicit in the lease is $14\%,$ which is known by Scupper.

Scupper's incremental borrowing rate is $15\%,$ and it uses the sum$-$of$-$the$-$years'$-$digits method to record depreciation on similar equipment.

The cost of the cultivator is $$250,000,00.$ The fair value of the cultivator to Tyrrell is $$271,15468$

The lessor incurs no material initial direct costs.

Tyrell expects to collect all lease payments from Scupper

Required:

Next Level Identify the type of lease involved for both Scupper and Tyrrell and give reasons for your classifications.

Prepare the journal entries for both Scupper and Tyrrell for $2019$