Tony Tiger, as lessee, enters into a lease agreement on May 1, 2020, for a tiger costume with Costume Inc. The following data are relevant to the lease agreement:

• The term of the noncancelable lease is 10 years, with no renewal option. Payments of $138,990 are due at the beginning of each year, starting today.

• The fair value of the costume is $1,000,000 (its a pretty unique costume). The costume has an economic life of 13 years with no salvage value.

• Tony Tiger depreciates similar costumes on a straight-line basis.

• $1,000 Executory costs are paid by the lessee on an annual basis, of which are included in the above rent payment to the lessor.

• Tony Tigers incremental borrowing rate is 8% per year and the implicit rate is unknown.

Required:

1. Indicate the type of lease Tony Tiger has entered into.

2. Prepare a partial amortization schedule for the lessee that goes up to 5/1/22.

Date	Lease payment	Executory Costs	interest expense	reduction in liability	lease liability
5/1/20
5/1/20
5/1/21
5/1/22

3. Prepare the journal entries on Tony Tigers books that relate to the lease agreement for the following dates: 5/1/20 (2 JEs), 12/31/20 (2 JEs), and 5/1/21 (1 JE).

4. Prepare the journal entries on Costume Incs books that relate to the lease agreement for the following date: 5/1/20 (2 JEs)