Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones

1) Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians’ Leasing purchased a lithotripter from Rand for $2,040,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. (FV of $1 (Links to an external site.), PV of $1 (Links to an external site.), FVA of $1 (Links to an external site.), PVA of $1 (Links to an external site.), FVAD of $1 (Links to an external site.) and PVAD of $1 (Links to an external site.)) (Use appropriate factor(s) from the tables provided.)   

Lease Description:   Quarterly lease payments3,126—beginning of each period Lease term 5 years (20 quarters) No residual value; no purchase option   Economic life of lithotripter 5 years Implicit interest rate and lessee’s incremental borrowing rate 12% Fair value of asset$2,040,000 

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Required:1. How should this lease be classified by Mid-South Urologists Group and by Physicians’ Leasing?2. Prepare appropriate entries for both Mid-South Urologists Group (Lessee) and Physicians’ Leasing (Lessor) from the beginning of the lease through the second rental payment on April 1, 2021. Adjusting entries are recorded at the end of each fiscal year (December 31).3. Assume Mid-South Urologists Group leased the lithotripter directly from the manufacturer, Rand Medical, which produced the machine at a cost of $1.7 million. Prepare appropriate entries for Rand Medical from the beginning of the lease through the second lease payment on April 1, 2021.

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