The Harris Company is the lessee on a four-year lease with thefollowing payments at the end of each year:
| | |
| Year 1: | $ | 11,000 |
| Year 2: | $ | 16,000 |
| Year 3: | $ | 21,000 |
| Year 4: | $ | 26,000 |
|
An appropriate discount rate is 7 percentage, yielding a presentvalue of $61,233.
a-1. If the lease is an operating lease, what willbe the initial value of the right-of-use asset?
a-2. If the lease is an operating lease, what willbe the initial value of the lease liability?
a-3. If the lease is an operating lease, what willbe the lease expense shown on the income statement at the end ofyear 1?
a-4. If the lease is an operating lease, what willbe the interest expense shown on the income statement at the end ofyear 1? (Leave no cells blank – be certain to enter “0”wherever required.)
a-5. If the lease is an operating lease, what willbe the amortization expense shown on the income statement at theend of year 1? (Leave no cells blank – be certain to enter“0” wherever required.)
b-1. If the lease is a finance lease, what will bethe initial value of the right-of-use asset?
b-2. If the lease is a finance lease, what will bethe initial value of the lease liability?
b-3. If the lease is a finance lease, what will bethe lease expense shown on the income statement at the end of year1? (Leave no cells blank – be certain to enter “0” whereverrequired.)
b-4. If the lease is a finance lease, what will bethe interest expense shown on the income statement at the end ofyear 1? (Round your answer to the nearest dollaramount.)
b-5. If the lease is a finance lease, what will bethe amortization expense shown on the income statement at the endof year 1? (Round your answer to the nearest dollaramount.)
