Question 12 --/1 View Policies Current Attempt in Progress Sandhill Incorporated leases a piece of machinery to Monty Company on January 1, 2020, under the following terms. 1. The lease is to be for 4 years with rental payments of $14,720 to be made at the beginning of each year. 2. The machinery' has a fair value of $77,298, a book value of $57,680, and an economic life of 10 years. At the end of the lease term, both parties expect the machinery to have a residual value of $28,840. To protect against a large loss, Sandhill requests Monty to guarantee 3. $20,380 of the residual value, which Irving agrees to do. 4. The lease does not transfer ownership at the end of the lease term, does have any bargain purchase options, and the asset is not of a specialized nature. 5. The implicit rate is 5%, which is known by Monty. 6. Collectibility of the payments is probable. Click here to view factor tables. Evaluate the criteria for classification of the lease, and describe the nature of the lease. For the lessee, it is a operating lease, and for the lessor, it is a finance lease e Textbook and Media List of Accounts Prepare the journal entries for Monty for the year 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 1 Right-of-Use Asset Lease Liability (To record lease) Jan. 1 Lease Liability 14,720 Cash 14,720 (To records first lease payment) Dec. 31 Interest Expense Lease Liability (To record accrued interest) Dec. 31 Amortization Expense Right-of-Use Asset (To record amortization expense) e Textbook and Media List of Accounts Prepare the journal entries for Sandhill for the year 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to O decimal places eg. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 1 Lease Receivable Cost of Goods Sold Sales Revenue Inventory (To record lease) Jan. 1 Cash Lease Receivable (To record first lease payment) Dec. 31 Lease Receivable Interest Revenue (To record lease revenue) e Textbook and Media List of Accounts Evaluate the criteria for classification of the lease, and describe the nature of the lease, assuming that Monty did not guarantee any amount of the expected residual value. For the lessee, it is a , and for the lessor, it is a e Textbook and Media List of Accounts Suppose Monty did not guarantee any amount of the expected residual value. Prepare the journal entries for Monty for the year 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 1 (To record lease) Jan. 1 (To record first lease payment) Dec. 31 (To record interest and amortization) Suppose Monty did not guarantee any amount of the expected residual value. Prepare the journal entries for Sandhill for the year 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 1 (To record lease payments) Dec. 31 (To record lease revenue) Dec. 31 (To record depreciation)