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in January 1, 2020, Rashed company signs a 4 year, non renewable and non cancelable lease agreement to lease equipment from Manamna Company. The lease mement requires equal amual rental payment of $120,000 beginning on January 1, 2020. The following information pertains to this lease agreement 1. The Far value of the equipment al January 1, 2020 is $420,000. 2 The equipment has an estimated economic life of 5 years. The yearly rental payment includes $7,243 86 of executory costs related to taxes on the property The lessoes incremental borrowing rate is 10%. The lessor's implicit rate is 9% and is known to the lessee 3. The equpment will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $24,000, non of which is quaranteed. 6. Both Rashed Company and Manama Company use the straight-line method of depreciation. Additional information: The present value dan Ordinary Annuty of $1 and the present value of an Annuity Due of $1 for 5 periods at 8%, 9% and 10% are as follows: he present value of an Ordinary Annuity of S1 jod 8% 9% 0.92593 0.91743 1.78326 1.75911 257710 253129 3.31213 3.23972 399271 3.88965 10% 0.90909 1.73554 2.48685 3.16987 3.79079 value of an Annuity Due of S1 8% 9% 1.00000 1.00000 1.92593 1.91743 2.78326 2.75911 3.57710 3.53129 4.31221 4.23972 10% 1.00000 1.90909 2.73554 3.48685 4.16987 o. Both Rashed Company and Manama Company use the straight-line method of depreciation massel is expected to have a Additional information: The present value of an Ordinary Annuity of $1 and the present value of an Annuity Due of $1 for 5 periods at 8%, 9% and 10% are a 1 2 3 The present value of an Ordinary Annuity of $1 Period 8% 9% 0.92593 0.91743 1.78326 1.75911 2.57710 253129 3.31213 3.23972 3.99271 3.88965 4 10% 0.90909 1.73554 2.48685 3.16987 3.79079 5 2 3 4 The present value of an Annuity Due of $1 Period 8% 9% 1.00000 1.00000 1.92593 1.91743 2.78326 2.75911 3.57710 3.53129 4.31221 4.23972 10% 1.00000 1.90909 2.73554 3.48685 4.16987 5 Instructions: 9% 1 000 191743 275911 3.53129 4.23972 10% 1 00000 1.90909 273554 3.48685 4.16987 357710 Instructions (a) that is the nature of this lease to Rashed Company? Why? (D) Prepare an amortization schedule through the years 2020 and 2021 that would be suitable for the lessee. (C) Prepare all of the journal entries for the lessee for the year 2020 to record the lease agreement, the lease payments, and all expenses related to this lease. Asume the lessee's annual accounting period ends on December 31. (d) Assume that the $24,000 is guaranteed residual value show the effect on (i) the amount to be capitalized and (ii) on the depreciation. PV Single Surn 9%, 4 periods 70843 10%, 4 periods 68301 For the toolber, press ALT F10 (PG or ALT+AN+F10 (Mac). BIUS Paragraph Arial 14px 5 v A

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