Please answer the steps this is all 1 Question. Will Upvote!!! On January 1 of Year 1, Lessee Inc. leased equipment at an annual payment of $255,297, payable each January 1 for four years, with the first payment due immediately. The equipment had a fair value of $1,200,000 and a book value of $1,125,000, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of eight years and an estimated residual value of $375,000, not guaranteed by the lessee. Lessor's implicit rate is 7.5%, which is unknown to the lessee. The lessee's incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease.
Required
a. How would Lessee Inc. classify the lease?
Operating Lease
Lease Liability Schedule
Right-of-Use Asset Schedule journal Entries
b. Prepare a schedule of the lease liability for the 4-year lease term.
Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule.
C. Prepare a schedule of the right-of-use asset for the 4-year lease term.
Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule.
d. Prepare the entries for Lessee Inc. on January 1 and December 31 of the first two years of the lease term, assuming Lessee Inc.'s accounting year ends December 31.
Note: Round your answers to the nearest whole dollar.
