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16. From the lessee's perspective, in the earlier years of a lease, A) operating Icases will cause debt to increase, compared to finance leases. B)

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16. From the lessee's perspective, in the earlier years of a lease, A) operating Icases will cause debt to increase, compared to finance leases. B) operating leases will cause income to increase, compared to finance leases. C) finance leases will enable the lessee to report higher income, compared to operating leases. D) finance leases will cause debt to increase, compared to operating leases. 17. A single lease expense is recognized on the income statement for A) a finance lease. B) an operating lease. C) both a finance lease and an operating lease. D) neither a finance lease or an operating lease. 18. Pisa, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of $344,152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. If Pisa, Inc.'s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%, what is the amount recorded for the leased asset at the lease inception? PV Annuity Duc PV Ordinary Annuity 8%, 4 periods 3.57710 3.31213 10%. 4 periods 3.48685 3.16986 A) $1,139,874 B) $1,200,000 C) $1,090,912 D) $1,231,066 19. On January 2, 2018. Hernandez, Inc. signed a ten-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $300,000 starting at the beginning of the first year, with title passing to Hernandez at the expiration of the lease. Hernandez treated this transaction as a finance lease. The drill press has an estimated useful life of 15 years, with no salvage value. Hernandez uses straight-line depreciation for all of its plant assets. Aggregate lease payments were determined to have a present value of $1,800,000, based on implicit interest of 10%. In its 2018 income statement, what amount of interest expense should Hernandez report from this lease transaction? A) $150,000 B) $180,000 C) $135,000 D) SO

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