The following facts pertain to a non-cancelable lease agreement between Lennox Leasing

^{Company and Gill Compan y , a lessee. (Round all numbers to the nea r est cent.)}

Inception date: May 1, 2014

Annual lease payment due at the beginning of each year, beginning with May 1, 2014: $18,829.49

Bargain-purchase option price at end of lease term: $4,000.00

Lease term: 5 years

Economic life of leased equipment: 10 years

Lessor ’s cost: $65,000.00; fair value of asset at May 1, 2014, $81,000.00

Lessor ’s implicit rate: 10%; lessee’s incremental borrowing rate 10% The lessee assumes responsibility for all executory costs.

Instructions

(a) Discuss the nature of this lease to Gill Company.

^{(b) Discuss the natu r e of this lease to Lennox Compan y .}

^{(c) P r epa r e a lease amortization schedule for Gill Company for the 5-year lease term.}

^{(d) P r epa r e the journal entries on the lessee’s books to r eflect the signing of the lease ag r eement and to}

^{r eco r d the payments and expenses r elated to this lease for the years 2014 and 2015. Gill’s annual}

^{accounting period ends on December 31. Reversing entries a r e used by Gill.}