E$21\mathrm{.}10($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

Annual lease payment due at the beginning of each year, beginning

with May $1,2020$

Bargain purchase option price at end of lease term

Lease term

Economic life of leased equipment

Lessor's cost

Fair value of asset at May $1,2020$

Lessor's implicit rate

Lessee's incremental borrowing rate

May $1,2020$

$$20,471\mathrm{.}94$

$$4,000\mathrm{.}00$

$5$ years

$10$ years

$$65,000\mathrm{.}00$

$$91,000\mathrm{.}00$

$8\%$

$8\%$

Instructions

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

a$.$ Discuss the nature of this lease to Rode.

b$.$ Discuss the nature of this lease to Mooney.

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

d$.$ 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 $2020$ and $2021.$ Rode's annual

accounting period ends on December $31.$ Reversing entries are used by Rode.