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On January 1, 2018, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasings lease amortization schedule appear below:

Jan. 1	Payments		Effective Interest		Decrease in Balance		Outstanding Balance
							220,076
2018	23,500				23,500		196,576
2018	23,500		19,658		3,842		192,734
2019	23,500		19,273		4,227		188,507
2020	23,500		18,851		4,649		183,858
2021	23,500		18,386		5,114		178,743
2022	23,500		17,874		5,626		173,118
2023	23,500		17,312		6,188		166,930
2035	23,500		5,844		17,656		40,787
2036	23,500		4,079		19,421		21,366
2037	23,500		2,137		21,366		0

Required:

1. What is Majestics lease liability at the beginning of the lease (after the first payment)? 2. What amount would Majestic record as a right-of-use asset? 3. What is the lease term in years? 4. What is the effective annual interest rate? (Round your percentage answers to 1 decimal place.) 5. What is the total amount of lease payments? 6. What is the total effective interest expense recorded over the term of the lease?

	1. Lease liability 2. Right-of-use asset 3. Lease term years 4. Effective annual interest rate % 5. Total of lease payments 6. Total effective interest expense

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