The following facts pertain to a non-cancelable lease agreement between ABBOTT Leasing Company and COSTELLO Company, a calendar year lessee. COSTELLO Company uses the straight-line method of depreciation for all of its depreciable assets and salvage value on leased assets is assumed to be zero.

Inception date:	January 1, 2021
Annual lease-payment due at the beginning of each year, beginning with January 1, 2021	$52,000
Lease term	4 years
Economic life of leased equipment	6 years
Yearly Executory costs (included in the $52,000) paid at beginning of the year	$2,000
Fair value of leased asset at January 1, 2021	$183,265
Lessors implicit rate (known to lessee)	8%
Lessees incremental borrowing rate	10%
Bargain Purchase Option	$6,000

a) Explain what type of lease this is to the lessee. Be clear!! Identify all of the tests passed.

b) Compute the present value of ALL the minimum lease payments. Round all calculations to the nearest dollar.

c) Record all of the entries required by the lessee on 1-1-2021.

Complete the lessees amortization schedule for the first TWO years. The companys year-end is December 31. EXCLUDE THE EXECUTORY COSTS FROM THIS TABLE. (Round all calculations to nearest dollar!)

Date	MLP	Interest	Reduction in Lease Liability	Lease Liability
1-1-21
1-1-21
1-1-22

- Record all of the proper adjusting entries for the lessee at the end of the first year (12-31-21).

- Show what the relevant sections of the 12-31-21 Balance Sheet would look like with respect to this lease.

- Show the relevant 2021 Income Statement accounts and amounts reported under this lease.

- Record the proper journal entry for COSTELLO Company on 1-1-2022. (Think logically)

- If this lease were one year or less, what would be reported in the financial statements? Assume the annual lease payment is still $52,000 which includes the $2,000 of executory costs. Be clear, please.