The following are a series of unrelated situations. Answer the questions relating to each of the following independent situations as requested: 10) Garcia SE leases equipment to Mercer AG on January 1, 2022. The following information relates to the lease agreement i) The term of the lease is 5 years with no renewal option, and the machinery has an estimated economic life of 6 years. ii) The cost of the machinery is 800,000, and the fair value of the asset on January 1, 2022, is 1,100,000 iii) At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of 75,000 (amount expected to be paid is nil). Mercer depreciates all of its equipment on a straight-line basis. iv) The lease agreement requires equal annual rental payments, beginning on January 1, 2022. v) The collectibility of the lease payments is probable. vi) Garcia desires a 9% rate of return on its investments. Mercer's incremental borrowing rate is 11% Garcia's implicit rate is unknown to Mercer. vii) Both the lessee's and the lessor's accounting periods end on December 31. Instructions a) Calculate the amount of the annual rental payment required. b) Prepare the journal entries Garcia would make in 2022 and 2023. c) Compute the present value of the lease payments for Mercer. d) Prepare the journal entries Mercer would make in 2022 and 2023 related to the lease arrangement