The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Shigeki Company, a lessee.

The lessee assumes responsibility for all executory costs, which are expected to amount to €5,000 per year.
The asset will revert to the lessor at the end of the lease term. The lessee has guaranteed the lessor a residual value of €50,000. The lessee uses the straight-line depreciation method for all equipment.
Instructions (Round all numbers to the nearest euro.)

(a) Prepare an amortization schedule that would be suitable for the lessee for the lease term.

(b) Prepare all of the journal entries for the lessee for 2015 and 2016 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual accounting period ends on December 31 and reversing entries are used when appropriate.

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Inception date Annual lease payment due at the beginning of each year, beginning with January 1, 2015 Residual value of equipment at end of lease term, guaranteed by the lessee Lease term Economic life of leased equipment Fair value of asset at January 1, 2015 January 1, 2015 124,798 50,000 6 years 6 years 600,000 Lessor's implicit rate Lessee's Incremental borrowing rate 12% 12%