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Sigma Ltd. uses leases as a method of selling small aircraft. The company has just completed production of an airplane at a cost of $3,000,000 and will lease it to Epsilon Corp., a small charter airline, on July 2, 2013. Sigma marks up its airplanes by 30% of cost to arrive at a selling price. The terms of the lease are as follows: Lease term Useful life Estimated value, end of lease term (unguaranteed) Purchase option, end of lease term Estimated salvage value, end of useful life Interest rate implicit in the lease Lessee's incremental borrowing rate Date of first annual lease payment 20 years 25 years $500,000 $ 50,000 $ 40,000 10% 12% July 2, 2013 Instructionsfor lessee (Epsilon Corp.): 1. Calculate the amount of each annual lease payment that Sigma Ltd. would require if it wanted to earn a 10% return on the lease transaction. 2. Prepare the entries for Epsilon Corp. for (i) 2013 and (ii) 2014 assuming Epsilon has a December 31 year end. Assume that Epsilon is aware of the lessor's implicit interest rate. 3. Prepare the entry(ies) made by Epsilon at the end of the lease term assuming Epsilon acquires the airplane by making a payment equal to the purchase option. 4. For its year ended December 31, 2014, indicate what accounts and amounts related to this lease would be reported by Epsilon on the following financial statements: Classified Balance Sheet Income Statement Cash Flow Statement 5. Answer parts 1. and 2. (i) again, but this time, under the assumption that Epsilon guaranteed a residual value of $500,000 and there was no purchase option at the end of the lease. Instructionsfor lessor (Sigma Ltd.): 6. Based on your answer to 1. above, prepare the entries Sigma would make during its fiscal years ended September 30, 2013 and 2014. Show all calculations