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On January 1, Year 1, Kristoph Enterprises manufactured a piece of equipment with a cost...

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Accounting

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On January 1, Year 1, Kristoph Enterprises manufactured a piece of equipment with a cost of $325,000 and a fair value of $412,500. On that date, Kristoph Enterprises leases the asset to Valera Mango Company at fair value for a 4 -year term at an interest rate of 9%. The annual lease payment is due at the beginning of each year, and the first payment is to be collected at the inception date. The leased asset will revert back to Kristoph Enterprises at the end of the lease term. The equipment has an estimated residual value of $15,000 which is not guaranteed by the lessee. The asset has an estimated useful life of 4 years. Both Kristoph Enterprises and Valera Mango Company have a calendar-year reporting period. 1B. Compute the amount of the annual lease payments to be collected by the lessor. 1C. Prepare the amortization schedule for this lease. 1D. Determine the cost of the lessee's Right of Use asset. 1E. Prepare all the journal entries for the lessor for Years 1 and 2. 1F. Determine what amounts would be reported on the lessor's balance sheet and income statement for (a) Year 1, (b) Year 2, and (c) Year 4 1A. What type of lease is this to the lessee and to the lessor? Briefly describe why

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