1) On December 31, 2019, Northern Skies Corp. leased a machine from Eastern Star Ltd. for a five-year period. Annual lease payments are $315,000 (including $15,000 annual executory costs), due on December 31 each year. The first payment was made on December 31, 2019, and the second payment on December 31, 2020. The appropriate interest rate for this type of lease is 10%. The present value of the minimum lease payments at the inception of the lease (before the first payment) was $1,251,000. The lease is being accounted for as a finance lease by Northern Skies. On its December 31, 2020 statement of financial position, Northern Skies should report a lease liability of

A) 951,000 B) 936,000 C) 855,900 D) 746,100

2) On January 1, 2020, Marlene Corp. enters into an agreement with Dietrich Rentals Inc. to lease a machine from them. Both corporations adhere to ASPE. The following data relate to the agreement: 1. The term of the non-cancellable lease is three years with no renewal option. Payments of $271,622 are due on December 31 of each year. 2. The fair value of the machine on January 1, 2020, is $700,000. The machine has a remaining economic life of 10 years, with no residual value. The machine reverts to the lessor upon the termination of the lease. 3. Marlene depreciates all its machinery on a straight-line basis. 4. Marlene's incremental borrowing rate is 10%. Marlene does not have knowledge of the 8% implicit rate used by Dietrich. If Dietrich records this lease as a finance lease, what amount would be recorded as Lease Receivable at the inception of the lease?

A) 814,866 B) 271,622 C) 700,000 D) 675,483

3) On January 2, 2018, Moose Corp. purchased machinery for $270,000. The entire cost was incorrectly recorded as an expense. The machinery has a nine-year life and a $18,000 residual value. Beaver uses straight-line depreciation for all its plant assets. The error was not discovered until May 1, 2020, and the appropriate corrections were made. Ignore income tax considerations.

Mooses income statement for the year ended December 31, 2020 would show the cumulative effect of this error in the amount of:

A) 186,000 B) 242,000 C) 0 D) 214,000