The following facts pertain to a noncancelable lease agreement between Quick Leasing Company and Habib Company, a lessee.

Inception date: May 1, 2014

Annual lease payment due at the beginning of each year, beginning with May 1, 2014 Rs.21,227.65

Bargain-purchase option price at end of lease term Rs. 4,000.00

Lease term 5 years

Economic life of leased equipment 10 years

Lessor's cost Rs.65,000.00

Fair value of asset at May 1, 2014 Rs.91,000.00

Lessor's implicit rate 10%

Lessee's incremental borrowing rate 10%

The collectability of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs. Instructions:

(a) Discuss the nature of this lease to Habib Company.

(b) Discuss the nature of this lease to Quick Company.

(c) Make a lease amortization schedule for Habib Company for the 5-year lease term.

(d) Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2014 and 2015. Habib's annual accounting period ends on December 31. Reversing entries are used by Habib.