Prepare entries at inception for lease and lessor

Problem 4. Following are the terms of a lease entered into on January 20, 2020. [LC, IDC) FMV of asset at inception of lease $500,000.00 Estimatedresidual value of asset at lease termination $80,000.00 Portion of residual value guaranteed by Lessee $50,000.00 Lessor's amortized cost of asset at inception of lease $500,000.00 Duration of lease 2 yrs Lease payment amount $230,458.00 Frequency of payments annually First payment due at inception of lease? Y es Purchase option that Lessee is reasonably certain to exercise? No Title transfers to Lessee at any time during or at end of lease? No Lessor's implicit rate 12% Lessee's incremental borrowing rate 12% Does Lessee know Lessor's implicit rate? yes Remaining economic life of asset Economic life of asset when new 5 yrs Specialized use asset with no alternative use to Lessor at end of lease? Nonlease components included in lease payment? Initial direct costs incurred by Lessor (assume recorded by Lessor in Misc. Expenses when incurred) $10,000 Initial direct costs incurred by Lessee (assume recorded by Lessor in Msc. Expenses when incurred) $12,000 Required 1. Prepare Lessor's and Lessee's entry to record the lease on January 20, 2020. Assume that the initial direct costs incurred by each were incurred on January 5, 2020 and were recorded in Miscellaneous Expenses on that date. 5 yrs no no Enter your entries below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box. Entries by Lessee at inception of lease on 1/20/2020: Account Debit Credit 1 1 1 1 1 1 Entries by Lessor at inception of lease on 1/20/2020: Account Debit Credit NNNNNN 2. Redo Lessor's entry to book the lease on January 20, 2020 assuming that the Lessor's amortized cost of the asset is $400,000. Enter your entries below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box. Entries by Lessor at inception of lease on 1/20/2020: Account Debit Credit 3 3 3 3 Accumulated depreciation (Bal. Sht) Cash (Bal. Sht) Deferred rent revenue (Bal. Sht) Equipment (al. Sht) Lease payable (Bal. Sht) Lease receivable (Bal. Sht) Note payable (Bal. Sht) Prepaid service contract (Bal. Sht) Right-of-Use asset (Bal. Sht) Warehouse (Bal. Sht) Amortization expense (Inc. Stmt) Cost of goods sold (Inc. Stmt) Gain on sale of warehouse (Inc. Stmt) Interest expense (Inc. Stmt) Interest revenue (Inc. Stmt) Lease expense (Inc. Stmt) Lease revenue (Inc. Stmt) Misc. expenses (Inc. Stmt) Rent revenue (Inc. Stmt) Sales revenue (Inc. Stmt)