How would you solve this question below? Step by step. thank you. On July 1^st, 20X4, the Wawa Corporation, a manufacturer and distributor of DVD recorders, entered a lease with Rollin Rental Inc. Wawa agreed to lease 20 DVDs for a period of six years beginning July 1^st, 20X4. Other lease terms as follows:

Annual Lease Payments beginning 01/07/X4 ..............	$ 2,003
Manufacturing Cost of each DVD ................................	300
Normal Selling Price of each DVD ..............................	525
Estimated economic (EUL) for the DVD's ...................	9 years
Implicit rate in the lease (not known by Rollin) Estimated Residual Value of each DVD at the end of the lease term	10.0 %
(not guaranteed by Rollin) ...............................	$ 80

Rollin can borrow at 12.0 percent and agrees to assume full responsibility for all repairs and maintenance of the machines. Rollin will return the DVDs to Wawa. Since Rollin is a good credit risk, Wawa is certain to collect the lease payments and will not incur any additional costs after the date of the lease agreement.

Both Companies follow ASPE

Required:

1. Determine how Wawa, the lessor, and Rollin, the lessee, should classify the lease.
2. Make all required journal entries for the Lessee on July 1^st, 20X4.
3. Make the required journal entries for the Lessee on December 31^st, 20X4 (assuming a December 31^stFiscal Year End).
4. Make the required journal entries for the Lessee on July 1^st, 20X5
5. Make the required journal entries for the Lessee on December 31^st, 20X5 (assuming a December 31^stFiscal Year End).
6. Assume that when the DVD's are returned to Wawa at the end of the lease term, the residual value of each DVD is only $70. Prepare the journal entry to record the return of the machines by Rollin.