Part $.$FASB Codification Research

The FASB codification's topic $842$governs the accounting for leases. $$this part $$the project,

you will investigate the codification and answer the following questions. Please make sure $$

clearly quote relevant text from the codification $$support your answers.

Using the codification's search tool, identify the specific paragraphs that discuss how $$

classify a lease. Where $$the codification are the five criteria $$lease classification $$

discussed $$class$?$ Can a lease change classification subsequently $($did not discuss

this $$class$)?$

Demonstration problem $15-3($version and lessor version$)$related $$the

accounting for operating leases. For this problem, provide detailed explanation for the

solutions from the lessee's perspective. You should cite relevant text from the codification

$$support your explanation. $$example$,$ when you discuss the calculation $$initial

lease payable, you can cite the following text from paragraph $842-20-30-3$about discount

rate: "A lessee should use the rate implicit $$the lease whenever that rate $$readily

determinable. $$the rate implicit $$the lease $$not readily determinable, a lessee uses its

incremental borrowing rate".

$15-3($lessee version$)$

On December $31,2024,$ Ajax Inc. is the lessee in a lease contract for an equipment with a term of $5$ years, minimum annual payment of $\backslash (\backslash$$ $15,000\backslash ),$ with the first payment due immediately. The equipment has a useful life of $10$ years $($with no salvage value$)$ and the lease has no purchase option. Ajax classifies the lease as an operating lease. Ajax's cost of capital is $\backslash (8\backslash \%\backslash ).$

Required:

a$.$ Prepare Ajax's journal entries on Dec $31,2024$ for the inception of lease and the first lease payment. What is Ajax's $2024$ year$-$end balance for lease payable?

b$.$ Prepare Ajax's journal entry on Dec $31,2025$ for the second lease payment. What is Ajax's $2025$ year$-$end balance for lease payable?

c$.$ Prepare the journal entry on Dec $31,2025$ to recognize Ajax's amortization expense for the right$-$of$-$use asset in $2025.$ What is Ajax's $2025$ year$-$end balance for right$-$of$-$use asset?