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Part two of the question Chegg wouldn't let me post this problem as one due to the length please only due 4-6 on the required

Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2024, Rhone-Metro leased equipment to Western Soya Company for a noncancelable stated lease term of four years ending December 31, 2028, at which time possession of the leased asset will revert back to Rhone-Metro.

• The equipment cost $390,000 to manufacture and has an expected useful life of six years.
• Its normal sales price is $445,490.
• The expected residual value of $27,000 on December 31, 2028, is not guaranteed.
• Western Soya Company is reasonably certain to exercise a purchase option on December 30, 2027, at an option price of $12,000.
• Equal payments under the lease are $166,000 (including $5,000 annual maintenance costs) and are due on December 31 of each year.
• The first payment was made on December 31, 2024.
• Western Soyas incremental borrowing rate is 13%.
• Western Soya knows the interest rate implicit in the lease payments is 11%. Both companies use straight-line depreciation or amortization.

[Hint: A lease term ends for accounting purposes when an option becomes exercisable if its expected to be exercised (i.e., a BPO).]

Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Required:

1. Show how Rhone-Metro calculated the $166,000 annual lease payments. Note: Round your intermediate and final answers to nearest whole dollar.
2. How should this lease be classified (a) by Western Soya Company (the lessee) and (b) by Rhone-Metro Industries (the lessor)?
3. Prepare the appropriate entries for both Western Soya Company and Rhone-Metro on December 31, 2024.
4. Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee and the lessor.
5. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2025 (the second rent payment and amortization).
6. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 30, 2027, assuming the purchase option is exercised on that date.

Required 4 Lessor

	Lease Amortization Schedule December 31 Payments Effective Interest Decrease in Balance Outstanding Balance 2024 2024 2025 2026 2027 0 0 0

Required 5 Lessee

A)Record amortization expense in the books of lessee.

	Date General Journal Debit Credit December 31, 2025

B)Record maintenance expense in the books of lessee.

	Date General Journal Debit Credit December 31, 2025

C)Record cash payment in the books of lessee.

	Date General Journal Debit Credit December 31, 2025

Required 5 Lessor

A)Record cash received in the books of lessor. dec 31 2025

	Date General Journal Debit Credit December 31, 2025

Required 6 Lessee

A)Record amortization expense in the books of lessee.

	Date General Journal Debit Credit December 31, 2027

B)Record cash payment for bargain purchase option in the books of lessee. dec 31 207

	Date General Journal Debit Credit December 31, 2027

C) Record maintenance expense in the books of lessee. dec 31 2027

	Date General Journal Debit Credit December 31, 2027

D) Record transfer of equipment ownership in the books of lessee. dec 31 2027

	Date General Journal Debit Credit December 31, 2027

Required 6 Lessor

A) Record cash received for bargain purchase in the books of lessor. Dec 31 2027

	Date General Journal Debit Credit December 31, 2027

B) Record the cash payment of maintenance costs in the books of the lessor. December 31, 2027

	Date General Journal Debit Credit December 31, 2027

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