Problem 8 Lessee - No Guaranteed Residual Value No Executory Costs Use the correct table! Watch when payments are due! P Company enters into a lease agreement with L Co. on Jan 1, 1998, to lease a machine to be used in its manufacturing operations. The following data pertain to this agreement. a. b. The term of the noncancelable lease is 5 years, with no residual value at the end of the lease term. Payments of $90,158 are due at the end of each year. The fair value of the machine on Jan 1, 1998 is $325,000. The machine has an economic life of 5 years, with salvage value of $10,000 none of which is guaranteed. The machine reverts to the lessor upon the termination of the lease. Puses the Straight Line method for depreciation. P's incremental borrowing rate is 12%. C. d. 1) Is this a capital lease or operating lease. Why? 2) Instructions Prepare journal entries on the books of the lessee through the first two years of lease. The accounting period of P and L Company ends on December 31