(20 points) Wolf Company manufactures a computer with an estimated economic life of 12 years and leases it to Fly Airlines for a period of 10 years....

2. (20 points) Wolf Company manufactures a computer with an estimated economic lifeof 12 years and leases it to Fly Airlines for a period of 10 years. The normal selling priceof the equipment is $210,482, and its unguaranteed residual value at the end of the leaseterm is estimated to be $20,000. Fly will pay annual payments of $30,000 at thebeginning of each year and all maintenance, insurance, and taxes. Wolf incurred costs of$135,000 in manufacturing the equipment and $4,000 in negotiating and closing thelease. Wolf has determined that the collectibility of the lease payments is reasonablypredictable, that no additional costs will be incurred, and that the implicit interest rate is10%.Required:(Round all numbers to the nearest dollar.)(a) Discuss the nature of this lease in relation to the lessor and compute the amount ofeach of the following items.(a1) Lease receivable.(a2) Sales price.(a3) Cost of sales.(b) Prepare a 10-year lease amortization schedule.(c) Prepare all of the lessor’s journal entries for the first year.(d) Assume Fly Airlines Co. has an incremental borrowing rate of 10%.(d1) Discuss the nature of this lease in relation to the lessee, and compute theamount of the initial obligation under capital leases.(d2) Prepare a 10-year lease amortization schedule.(d3) Prepare all of the lessee’s journal entries for the first year.