E$20\mathrm{.}10($LO $2,4)($Lessee Entries with Bargain Purchase Option$)$ The following facts pertain to a non$-$cancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee.

Commencement date May $1,2025$

Annual lease payment due at the beginning of each year, beginning with May $1,2025$ $$20,471\mathrm{.}94$

Bargain purchase option price at end of lease term $ $4,000\mathrm{.}00$

Lease term $5$ years

Economic life of leased equipment $10$ years

Lessor$$s cost $$65,000\mathrm{.}00$

Fair value of asset at May $1,2025$ $$91,000\mathrm{.}00$

Lessor$$s implicit rate $8\%$

Lessee$$s incremental borrowing rate $8\%$

The collectibility of the lease payments by Mooney is probable.

Instructions

$($Round all numbers to the nearest cent.$)$

Discuss the nature of this lease to Rode.

Discuss the nature of this lease to Mooney.

Prepare a lease amortization schedule for Rode for the $5-$year lease term.

Prepare the journal entries on the lessee$$s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years $2025$ and $2026.$ Rode$$s annual accounting period ends on December $31.$ Reversing entries are used by Rode.