Finance and Operating Leases}

Trimurti Company has decided to lease its new office building. The following information is available for the lease:

\section*{Required:}
1. Determine whether this is a finance lease or an operating lease.
2. Regardless of your answer to the preceding question, assume that this is a finance lease and that the present value of the lease payments is \(\$ 829,500\). Record the liability and corresponding asset for this acquisition.
3. Record the interest expense on the finance lease at the end of the first year. Also assume no residual value and a 15 -year lease for the building. Record the first year's straight-line depreciation of the cost of the leased asset.

\section*{Problem

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Payments Length of lease Economic life of building Appropriate interest rate Cost of building if purchased $100,000 per year* 15 years 16 years 8.4% $875,000