15) On July 1, 2017, Janus Company leased equipment to Pluto Company. The terms of the lease are as follows: Â Fair value of leased asset 60,000 Lease payments, due at end of lease term starting June 30, 2018 12,000 Lease term 9 years Economic life of leased asset 10 years Guaranteed residual value 6,000 Lessee’s incremental borrowing rate 15% Â Pluto uses straight-line depreciation for its property, plant, and equipment, and its year-end is December 31. Â Required: Prepare the journal entries for the lease from July 1 through December 31. 16) Channel leased equipment to Montage Company on November 1, 2016. The terms of the lease are as follows: Lease term 12 years Economic life of leased asset 13 year Fair value of leased asset 105,000 Guaranteed residual value 10,000 Lease payments, due at the end of the year, starting Nov 1, 2017 11,000 Lessee’s incremental borrowing rate 5% Montage uses straight-line depreciation for its property, plant, and equipment. Â Required: Prepare the journal entries for the lease from November 1 through December 31, 2016. 17) Which factor would contribute toward the lessor classifying a lease as a financial lease? A) Lessor retains risk of breakage to leased asset. B) Lessor has reward of high resale value. C) Lessor does not have risk of change in demand for the leased asset. D) Lessor does not have guaranteed residual value. 18) What entry is required for the lessor in a finance lease? A) Loan receivable. B) Rental income. C) Interest expense. D) Depreciation expense. 19) What is the meaning of “minimum lease payments”? A) Payments over the lease term including executory costs. B) Payments over the lease term excluding executory costs. C) Payments over the lease term until the bargain purchase option is exercised. D) Payments over the lease term until guaranteed residual value is received. 20) Which entry is needed by the lessee for an operating lease? A) Recording of interest expense. B) Recording of the lease obligation. C) Recording of rental expense. D) Recording of depreciation expense. 21) What entry is required for the lessor in a operating lease? A) Gain/loss on asset sale. B) Loan receivable. C) Interest income. D) Depreciation expense.