On December $31,2024,$ Rhone$-$Metro Industries leased equipment to Western Soya Company for a four$-$year period ending December $31,2028,$ at which time possession of the leased asset will revert back to Rhone$-$Metro.

The equipment cost Rhone$-$Metro $$607,484$ and has an expected useful life of six years.

Its normal sales price is $$607,484.$

The lessee$-$guaranteed residual value on December $31,2028,$ is $$25,000.$

Equal payments under the lease are $$160,000$ and are due on December $31$ of each year.

The first payment was made on December $31,2024.$

Western Soya's incremental borrowing rate is $8\%.$

Western Soya knows the interest rate implicit in the lease payments is $6\%.$

Both companies use straight$-$line depreciation or amortization.

Note: Use Excel, or a financial calculator.

Required:

Show how Rhone$-$Metro calculated the $$160,000$ annual lease payments.

How should this lease be classified $($a$)$ by Western Soya Company $($the lessee$)$ and $($b$)$ by Rhone$-$Metro Industries $($the lessor$)?$

Prepare the appropriate entries for Western Soya Company on December $31,2024.$

Prepare an amortization schedule describing the pattern of interest over the lease term for the lesslee.

Prepare all appropriate entries for Western Soya on December $31,2025($the second lease payment and amortization$).$

Prepare the appropriate entries for Western Soya on December $31,2028,$ assuming the equipment is returned to Rhone$-$Metro and the actual residual value on that date is $$1,500.$