Windsor Industries and Sheridan Inc. enter into an agreement that requires Sheridan Inc. to build three diesel-electric engines to Windsor's specifications. Upon completion of the engines, Windsor has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2020, and requires annual rental payments of $384,019 each January 1, starting January 1, 2020. Windsor's incremental borrowing rate is 8%. The implicit interest rate used by Sheridan and known to Windsor is 6%. The total cost of building the three engines is $2,584,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Windsor depreciates similar equipment on a straight-line basis. At the end of the lease, Windsor assumes title to the engines. Collectibility of the lease payments is probable. Click here to view factor tables. Discuss the nature of this lease transaction from the viewpoints of both lessee and lessor. The lease should be treated as a by Windsor Industries. The lease should be treated as a v by Sheridan Inc. (b) Prepare the journal entry to record the transaction on January 1, 2020, on the books of Windsor (the lessee). (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter Ofor the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 58,971.) Account Titles and Explanation Debit Credit (c) Prepare the journal entry to record the transaction on January 1, 2020, on the books of Sheridan (the lessor). (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts. Round answers to 0 decimal places e.g. 58,971.) Account Titles and Explanation Debit Credit (d) Prepare the journal entries for both the lessee and lessor to record the first rental payment on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Lessee (January 1, 2020) Lessor (January 1, 2020) Debit Credit Prepare a lease amortization schedule for 2 years. (Round answers to 0 decimal places e.g. 58,971.) WINDSOR INDUSTRIES/SHERIDAN INCORPORATED Lease Amortization Schedule Annual Lease Receipt/Payment Interest on Receivable/Liability Reduction in Receivable/Liability Lease Receivable/Li Date 1/1/20 $ $ $ $ 1/1/20 1/1/21 1/1/22 Prepare the journal entries for both the lessee and lessor to record any entries needed in connection with the lease at December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Lessee (December 31, 2020) (To record interest) (To record amortization) Lessor (December 31, 2020) Debit Credit Show the items and amounts that would be reported on the balance sheet (not notes) at December 31, 2020, for both the le and the lessor. WINDSOR INDUSTRIES Balance Sheet (Partial) Asset $ Current Liability $ $ > SHERIDAN INC. Balance Sheet (Partial) Assets $ $ Assume that Windsor incurs legal fees related to the execution of the lease of $30,000. In addition, assume Windsor receives a lease incentive from Sheridan of $50,000 to enter the lease. How will this affect your answer to part b? Account Titles and Explanation Debit Credit Windsor Industries and Sheridan Inc. enter into an agreement that requires Sheridan Inc. to build three diesel-electric engines to Windsor's specifications. Upon completion of the engines, Windsor has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2020, and requires annual rental payments of $384,019 each January 1, starting January 1, 2020. Windsor's incremental borrowing rate is 8%. The implicit interest rate used by Sheridan and known to Windsor is 6%. The total cost of building the three engines is $2,584,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Windsor depreciates similar equipment on a straight-line basis. At the end of the lease, Windsor assumes title to the engines. Collectibility of the lease payments is probable. Click here to view factor tables. Discuss the nature of this lease transaction from the viewpoints of both lessee and lessor. The lease should be treated as a by Windsor Industries. The lease should be treated as a v by Sheridan Inc. (b) Prepare the journal entry to record the transaction on January 1, 2020, on the books of Windsor (the lessee). (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter Ofor the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 58,971.) Account Titles and Explanation Debit Credit (c) Prepare the journal entry to record the transaction on January 1, 2020, on the books of Sheridan (the lessor). (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts. Round answers to 0 decimal places e.g. 58,971.) Account Titles and Explanation Debit Credit (d) Prepare the journal entries for both the lessee and lessor to record the first rental payment on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Lessee (January 1, 2020) Lessor (January 1, 2020) Debit Credit Prepare a lease amortization schedule for 2 years. (Round answers to 0 decimal places e.g. 58,971.) WINDSOR INDUSTRIES/SHERIDAN INCORPORATED Lease Amortization Schedule Annual Lease Receipt/Payment Interest on Receivable/Liability Reduction in Receivable/Liability Lease Receivable/Li Date 1/1/20 $ $ $ $ 1/1/20 1/1/21 1/1/22 Prepare the journal entries for both the lessee and lessor to record any entries needed in connection with the lease at December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Lessee (December 31, 2020) (To record interest) (To record amortization) Lessor (December 31, 2020) Debit Credit Show the items and amounts that would be reported on the balance sheet (not notes) at December 31, 2020, for both the le and the lessor. WINDSOR INDUSTRIES Balance Sheet (Partial) Asset $ Current Liability $ $ > SHERIDAN INC. Balance Sheet (Partial) Assets $ $ Assume that Windsor incurs legal fees related to the execution of the lease of $30,000. In addition, assume Windsor receives a lease incentive from Sheridan of $50,000 to enter the lease. How will this affect your answer to part b? Account Titles and Explanation Debit Credit