The following facts pertain to a non-cancelable lease agreement between Hernandez Leasing Company and Sangsanoy Company, a lessee. Inception date: 1-May-2020 First payment due date: 1-May-2020 Bargain-purchase option price at end of lease term $5,000.00 Lease term 5 years Economic life of leased equipment 10 years Lessor's cost $63,900.00 Fair value of asset at May 1, 2020 $78,900.00 Lessor's implicit rate (unknown by the Lessee) 8% Lessee's incremental borrowing rate 11% 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. Present value of 1 for 5 periods at 8% 0.68058 Present value of 1 for 5 periods at 11% 0.59345 Present value of annuity for 5 periods at 8% 3.99271 Present value of annuity for 5 periods at 11% 3.69590 Present value of annuity due for 5 periods at 8% 4.31213 Present value of annuity due for 5 periods at 11% 4.10245 Part 1: Calculate the annual lease payments required by Hernandez Leasing Co, given their implicit rate of return. Part 2: What are the journal entries for the first two years (through Dec 31, 2021) for both the lessor and lessee? Amount PVF (n = LIE Present Value LESSOR Payment Annual Payment UGRV/GRV/BPO TOTAL Amount PVF (n = I=) Present Value LESSEE Payment Annual Payment GRV/BPO TOTAL Annual Lease Payment Plus BPO Interest on Liability Reduction of Lease Liability PMT Lease Liability Annual Lease Payment Plus BPO Interest on Liability Reduction of Lease Liability PMT Lease Liability The following facts pertain to a non-cancelable lease agreement between Hernandez Leasing Company and Sangsanoy Company, a lessee. Inception date: 1-May-2020 First payment due date: 1-May-2020 Bargain-purchase option price at end of lease term $5,000.00 Lease term 5 years Economic life of leased equipment 10 years Lessor's cost $63,900.00 Fair value of asset at May 1, 2020 $78,900.00 Lessor's implicit rate (unknown by the Lessee) 8% Lessee's incremental borrowing rate 11% 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. Present value of 1 for 5 periods at 8% 0.68058 Present value of 1 for 5 periods at 11% 0.59345 Present value of annuity for 5 periods at 8% 3.99271 Present value of annuity for 5 periods at 11% 3.69590 Present value of annuity due for 5 periods at 8% 4.31213 Present value of annuity due for 5 periods at 11% 4.10245 Part 1: Calculate the annual lease payments required by Hernandez Leasing Co, given their implicit rate of return. Part 2: What are the journal entries for the first two years (through Dec 31, 2021) for both the lessor and lessee? Amount PVF (n = LIE Present Value LESSOR Payment Annual Payment UGRV/GRV/BPO TOTAL Amount PVF (n = I=) Present Value LESSEE Payment Annual Payment GRV/BPO TOTAL Annual Lease Payment Plus BPO Interest on Liability Reduction of Lease Liability PMT Lease Liability Annual Lease Payment Plus BPO Interest on Liability Reduction of Lease Liability PMT Lease Liability