On the first day of its accounting year, Lessee Inc. leased certain property at a semiannual payment

Question:

On the first day of its accounting year, Lessee Inc. leased certain property at a semiannual payment of $\$ 60,000$ receivable at the beginning of each period for 8 years. The first payment was paid immediately. The leased property, which is new, cost $\$ 1,100,000$ and has an estimated useful life of 10 years and no guaranteed residual value. The lessee's incremental borrowing rate is $7 \%$ and the lessee is not aware of the lessor's implicit rate.

Required

a. How would Lessee Inc. classify the lease?

b. What balances (account titles, amounts) appear on Lessee Inc.'s balance sheet at the end of the first year, related to the lease?

c. What balances (account titles, amounts) appear on Lessee Inc.'s income statement for the first year, related to the lease?

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