22. On January 1, 2019, Greg Corporation signed a ten-year noncancelable lease for certain machinery. The terms of the lease called for Greg to make annual payments of $22,000 at the end of each year for ten years with the title passing to Greg at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Greg uses the straightline method of depreciation for all of its fixed assets. Greg accordingly accounted for this lease transaction as a finance lease. The lease payments were determined to have a present value of $134,202 at an effective interest rate of 8%. With respect to this capitalized lease, Greg should record for 2019 a. lease expense of $22,000. b. interest expense of $8,947 and depreciation expense of $7,614. c. interest expense of $10,736 and depreciation expense of $8,947. d. interest expense of $9,136 and depreciation expense of $13,420.

23. From the lessees perspective, in the earlier years of a lease, a. finance leases will enable the lessee to report higher income, compared to operating leases. b. finance leases will cause debt to increase, compared to operating leases. c. operating leases will cause income to increase, compared to finance leases. d. operating leases will cause debt to increase, compared to finance leases.

24. Lease A does not contain a bargain purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property. Lease B does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases? Lease A Lease B a. Operating lease Finance lease b. Operating lease Operating lease c. Finance lease Finance lease d. Finance lease Operating lease