Capital Lease On January 1, 2000, Whitter Corporation leased a small warehouse and agreed to pay $18,878 at the end of each of 20 years. The lease is considered to be a capital lease. The lease payments include 7 percent interest and have a present value of $200,000, which equals the purchase price of the warehouse.

a. What effect will the signing of the lease have on the accounting equation of Whitter Corporation?

b. What amount of interest expense will Whitter Corporation report for the year 2000?

c. What amount of depreciation expense will Whitter Corporation report for the year 2000 if straight-line depreciation is used?

d. Will Whitter’s net income for 2000 be increased or decreased as a result of recording the lease as a capital lease rather than an operating lease? By what amount?