Python Company leased equipment from Hope Leasing on January 1, 2020. Hope recently purchased the equipment at a cost of $222,664.

Other information:

Lease term 3 years

Annual payments $80,000 on January 1 each year

Life of asset 3 years

Fair value of asset $222,664

Implicit interest rate 8%

Incremental rate 8%

There is no expected residual value.

Required:

1. Show how Hope determined the $80,000 annual lease payments.
2. Prepare appropriate journal entries for Hope for 2020 and 2021. Round your answers to the nearest whole dollar amounts. Prepare an amortization schedule for Hope
3. Prepare appropriate journal entries for Python for 2020 and 2021. Assume straight-line depreciation and a December 31 year-end. Round your answers to the nearest whole dollar amounts.