URGENT

Deep Water Corporation enters into a lease agreement as lessor on January 1, 2020, to lease equipment to Sea Breeze Company. The term of the non-cancelable lease is 6 years and payments are required at the beginning of each year. The following information relates to this agreement: 1. The equipment has a cost of $420,000 and fair value of $550,000 to Deep Water, an estimated useful life of 8 years, and a salvage value of $20,000 at the end of that time. 2. Sea Breeze Company has the option to purchase the equipment for $20,000 when the lease expires. 3. Deep Water Corporation desires to earn a return of 8% on its investment. REQUIRED: a) Calculate the amount of the annual rental payment received by Deep Water Corporation. [2 Marks] b) Prepare the journal entries on the books of the Deep Water Corporation to record the lease agreement, to reflect payments received under the lease, and to recognize revenue, for 2020 and 2021. [8 Marks]