Problem $15-21($Algo$)$ Unguaranteed residual value; nonlease payments; sales$-$type lease $[$LO$15-2,15-6,$

$15-7]$

Rhone$-$Metro Industrles manufactures equipment that is sold or leased. On December $31,2024,$ Rhone$-$Metro leased equipment to

Western Soya Company for a four$-$year perlod ending December $31,2028,$ at which time possession of the leased asset will revert

back to Rhone$-$Metro.

The equipment cost $$650,000$ to manufacture and has an expected useful life of slx years.

Its normal sales price is $$715,170.$

The expected residual value of $$28,000$ on December $31,2028,$ is not guaranteed.

Equal payments under the lease are $$209,000($Including $$4,000$ maintenance costs$)$ 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 $14\%.$

Western Soya knows the Interest rate Implicit in the lease payments is $12\%.$

Both companles use straight$-$IIne depreclation or amortization.

Note: Use tables, Excel, or a financlal calculator. $($FV of $$1,$ PV of $$1,$ FVA of $$1,$ PVA of $$1,$ FVAD of $$1$ and PVAD of $$1)$

Requlred:

Show how Rhone$-$Metro calculated the $$209,000$ annual lease payments.

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

Prepare the approprlate entrles for both Westem Soya Company and Rhone$-$Metro on December $31,2024.$

Prepare an amortization schedule$($s$)$ describing the pattern of Interest over the lease term for the lessee and the lessor.

Prepare the approprlate entrles for both Western Soya and Rhone$-$Metro on December $31,2025($the second lease payment and

amortization$).$

Prepare the approprlate entrles for both Western Soya and Rhone$-$Metro on December $31,2028,$ assuming the equipment is

returned to Rhone$-$Metro and the actual residual value on that date is $$1,500.$

Complete this question by entering your answers in the tabs below.

Show how Rhone$-$Metro calculated the $$209,000$ annual lease payments.

Note: Round your intermediate and final answers to nearest whole dollar.