1 Alessor has designed and built equipment based on the lessee specifications for molding unique plastic parts that will only be used by the lessee. After being built, the equipment will have a fair value of $200,000. The lessee has agreed to the following terms: • Lease agreement is for ten-year period • Equipment will revert back to lessor at the end of lease • Fixed payments of $10,000 will be paid annually, providing a present value of $77,217 at 5% interest • The equipment is expected to have a 25-year useful life and no residual value Based on this information, the lessee determined the lease should be classified as a finance lease. Which classification test was used to determine this assignment? O Purchase option O Alternative use O Lease term O Present value

Oscar, Inc., leased equipment from Reynolds Company on January 1, 2023. Reynolds manufactured theequipment at a cost of $200,000. The equipment has a fair value of $260,000.Information related to the lease appears below:Lease term 5 yearsFirst lease payment January 1, 2023Subsequent lease payments December 31, 2023, 2024, 2025, 2026Economic life of the equipment 6 yearsEstimated value of equipment at end of economic life $0Purchase option, reasonably expected to be exercised by Oscar $20,000Implicit and incremental borrowing rate 8%   Prepare the entries to record the lease and the first payment for both the lessee and the lessor onJanuary 1, 2023.

6 Company A (lessee) has reached a lease agreement with Company B (assor) to kase a new carpet weaving machine beginning January 1, Year 1. The lease agreement contains the following information • The lease is for five years, requiring annual payments of $10,355.67 at the beginning of the year. • The weaving machine has a fair value at the beginning of the lease of $50,000; an estimated economic life of five years; and a guaranteed residual value of $2,500 (Company A expects that the value will be greater). • Present value of the weaving machine is $47,945.18. • There are no renewal options. At the end of the lease, the weaving machine will be returned to Company B. • Company A depreciates similar equipment that it purchases on a straight-line basis. • Company B sels the annual lease rate al 5% and Company A is aware of the rate. • The lease is a finance lease. COMPANY A LEASE AMORTIZATION SCHEDULE ANNUITY-DUE BASIS Annual Lease Payment Date January 1, Year 1 January 1, Year 1 January…

Skysong Dairy leases its milking equipment from Concord Finance  Company under the following lease terms. 1.   The lease term is 10 years, noncancelable, and requires equal rental payments of $32,500 due at the beginning of each year starting January 1, 2020. 2.   The equipment has a fair value at the commencement of the lease (January 1, 2020) of $244,649 and a cost of $267,000 on Concord Finance’s books. It also has an estimated economic life of 15 years and an expected residual value of $15,300, though Skysong Dairy has guaranteed a residual value of $19,700 to Concord Finance. 3.   The lease contains no renewal options, and the equipment reverts to Concord Finance upon termination of the lease. The equipment is not of a specialized use. 4.   Skysong Dairy’s incremental borrowing rate is 8% per year. The implicit rate is also 8%. 5.   Skysong Dairy depreciates similar equipment that it owns on a straight-line basis. 6.   Collectibility of the payments is probable. A)…