Use Accounting Standards Codification $842$ to answer

Bills Company entered into a non$-$cancelable lease agreement with Chiefs Company for

a certain machine. Chiefs' primary business is leasing. Bills will lease the machine for a

period of $3$ years, which is $60\%$ of the machine's economic life. Chiefs will take

possession of the machine at the end of the initial $3-$year lease and lease it to another

smaller company that does not need the most current version of the machine. Bills does

not guarantee any residual value for the machine and will not purchase the machine at

the end of the lease term. Bills' incremental borrowing rate is $10\%,$ and the implicit rate

in the lease is $9\%.$ Bills has no way of knowing the implicit rate used by Chiefs. Using

either rate, the present value of the lease payments is between $90\%$ and $100\%$ of the

fair value the machine at the date of lease agreement. Chiefs is reasonably certain that

Bills will pay all lease payments.

What type of lease has been entered into by Bills? Explain the reason of your

answer.

How should Bills compute the appropriate amount to be recorded for the

lease or asset acquired?

What accounts will be created or affected by this transaction, and how will the

lease of assets and other costs related to the transaction to be recorded in

earnings by Bills?

What type of leasing agreement has been entered into by the Chiefs $($lessor$)$

How should this lease by recorded by the Chiefs, and how are the

appropriate amounts determined?

How should Chiefs determine the appropriate revenue to be recognized from

each lease payment?