On December 31, 2010, Lopez Co (lessee) signed a 3-year, non-cancelable lease for the use of manufacturing

Question:

On December 31, 2010, Lopez Co (lessee) signed a 3-year, non-cancelable lease for the use of manufacturing equipment now owned by Zinger Inc (lessor). The lease expires December 31, 2013 and has the following terms:

1. Annual contractual payments of $16,664 at the end of each year. The first payment is due December 31, 2010.

2. No down payment, No purchase option

3. The asset's FMV at 12/31/10 is $60,000.

4. Lopez does note guarantee any residual value at 12/31/13.

5. Lopez can borrow at 10% per year for a 3-year loan; Lopez is unaware of Zinger's 8% desired return rate.

6. The estimated useful life of the asset is 4 years.

Give Lopez's annual cash flow (indicate operating/investing/financing) and income statement impacts, as well as the cumulative balance sheet impacts (including separating current vs. non-current debt) of this lease from 2010 to 2013. Round all answers to whole dollars.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...