On December $31,2020$ Western Inc leased equipment from Rhone Inc. The equipment had a fair

market value $($FMV$)$ of $$365,760,$ which is also the cost of the equipment. The lease stipulates that

annual payments of $$100,000$ will be made for $4$ years, at which time possession of the equipment

will revert back to Rhone. The first lease payment is made on December $31,2020,$ and subsequent

payments are made on December $31,$ of each year. Rhone estimates that the residual value of the

equipment to be $$25,000,$ and this amount is guaranteed by Western. The incremental borrowing rate

for Western is $12\%.$ The implicit interest rate, which is known by Western, is $10\%.$ The economic life

of the equipment is $6$ years. Western uses the calendar year for reporting purposes and straight$-$line

depreciation to depreciate other equipment. $($Remember to enter dollar values as negative numbers

in Excel formulas.$)$

Required:

$1.$ Is this a finance lease is this for Western, Inc. Why? $($List all criteria met.$)$

$2.$ Prepare a lease amortization table for Western Inc.

$3.$ Give the journal entries that would be made on Western$$s books from $12/31/20$ through

$12/31/22.$

$4.$ Prepare the journal entry Western Inc would make at the end of the lease assuming they

returned the equipment and the equipment had a FMV of $$17,500$