Vaughn Company, as lessee, enters into a lease agreement on January $1,2023,$ for

equipment. The following data are relevant to the lease agreement:

$1.$ The term of the noncancelable lease is $4$ years, with no renewal option. Payments

of $$422,689$ are due on January $1$ of each year.

$2.$ The fair value of the equipment on January $1,2023$ is $$1,512,000.$ The equipment

has an economic life of $6$ years with no salvage value.

$3.$ Vaughn depreciates similar machinery it owns on the straight$-$line basis.

$4.$ The lessee pays all executory costs.

$5.$ Vaughn$$s incremental borrowing rate is $10\%,$ but Vaughn knows that $8\%$ is the

lessor$$s implicit interest rate.

$6.$ Vaughn has a December $31$ year$-$end.

Required:

a$.$ Indicate the type of lease that Vaughn Company has entered into and why.

b$.$ Prepare an amortization table for Vaughn in Excel.

c$.$ Prepare the journal entries on Vaughn$$s books for the first two years of the lease

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