Sunland Incorporated leases a piece of machinery to Marigold Company on January 1, 2020, under the following terms.

1.		The lease is to be for 4 years with rental payments of $12,488 to be made at the beginning of each year.
2.		The machinery has a fair value of $66,146, a book value of $49,360, and an economic life of 10 years.
3.		At the end of the lease term, both parties expect the machinery to have a residual value of $24,680. To protect against a large loss, Sunland requests Marigold to guarantee $17,260 of the residual value, which Irving agrees to do.
4.		The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature.
5.		The implicit rate is 5%, which is known by Marigold.
6.		Collectibility of the payments is probable.

Evaluate the criteria for classification of the lease, and describe the nature of the lease. For the lessee, it is a sales-type leasefinance leaseoperating lease, and for the lessor, it is a sales-type leaseoperating leasefinance lease.

Prepare the journal entries for Marigold for the year 2020.

Prepare the journal entries for Sunland for the year 2020

Evaluate the criteria for classification of the lease, and describe the nature of the lease, assuming that Marigold did not guarantee any amount of the expected residual value. For the lessee, it is a operating leasesales-type leasefinance lease, and for the lessor, it is a finance leaseoperating leasesales-type lease.