Problem 15-1 Direct financing & sales-type lease; lessee and lessor L015-3 LO15-5 LO15-6 Text: P 15-3 Tech-Knowledgies voice recognition hardware from Tech-Knowledgies for $500,000 and leased it to Pal Learning Systems on January 1, 2016. Lease description: Quarterly rental payments $32,629-beginning of each period develops and manufactures voice recognition hardware. Star Leasing purchased a Lease term 5 years (20 quarters) No residual value; no BPO Economic life of lithotripter 5 years Implicit interest rate and lessee's incremental borrowing rate 12% Fair value of asset$500,000 Collectibility of the rental payments is reasonably assured, and there are no lessor costs yet to be incurred. Note: 15.32380 = present value of an annuity due of $1: n:20, 3% Required: 1.How should this lease be classified by Pal Learning Systems and by Star Leasing? 2. Prepare appropriate entries for both Pal Learning Systems and Star Leasing from the inception of the lease through the second rental payment on April 1, 2016. Depreciation is recorded at the end each fiscal year (December 31). Assume Pal Learning Systems leased the hardware directly from the manufacturer, Tech-Knowled which produced the machine at a cost of $450,000. Prepare appropriate entries for Tech-Knowled from the inception of the lease through the second rental payment on April 1,2016