Lessor rents a building to Lessee for 3 years starting on January 1, 19A. Both the cost and the selling price to Lessor are $25,000. There will be three lease payments beginning January 1, 19A. The building has a 3-year life with no salvage value. Lessor's target rate of return is 8% and Lessee is aware of this rate. There are no uncertainties regarding costs or collections.
(a) What type of lease is this? Why?
(b) Compute the annual rental.
(c) Prepare entries for both Lessor and Lessee for 19A.
(d) Prepare an amortization table.