Merlin Co Leased Equipment to Houdini Inc

Merlin Co. leased equipment to Houdini Inc. The equipment cost the lessor $200,000. The appropriate interest rate for this lease is 15%. The annual lease payments are made at the end of each year. The lease term is 3 years. The residual value at the end of the lease term is expected to be $40,000. Houdini has the option to purchase the equipment at that time for $20,000. Assume this is a direct financing lease.
Required:
1. For this lease:
(a.) The lease payment computed by the lessor is $_____________
(b.) The amount the lessee should capitalize is $____________
2. How much interest should be recognized at the end of year 1 by the:
(a.) Lessor? $__________
(b.) Lessee? $_____
$$\begin{array} { c c c c } { \mathbf { n } / \mathbf { i } } & \text { PV of \$1 } & \begin{array} { c } \text { PV, } \\\text { ordinary } \\\text { annuity }\end{array} & \begin{array} { c } \text { PV, } \\\text { annuity } \\\text { due }\end{array} \\\text { 1 period, } 15 \% & .86957 & .86957 & 1.00000 \\\text { 2 periods, 15\% } & .75614 & 1.62571 & 1.86957 \\\text { 3 periods, 15\% } & .65752 & 2.28323 & 2.62571\end{array}$$