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Analyzing, Interpreting, and Capitalizing Operating Leases On January 1, 2020, Alexander Mack Adventures Inc. entered into land leases that grant unrestricted access to property in

Analyzing, Interpreting, and Capitalizing Operating Leases On January 1, 2020, Alexander Mack Adventures Inc. entered into land leases that grant unrestricted access to property in Texas where the company plans to build an RV resort. Lease details follow.

  • Lease term: 15 years.
  • Upfront fees: $450,000 paid in cash.
  • Annual lease payment: $350,000 due at each year-end.
  • Lessee responsible for property tax and insurance.

The company also leased computer equipment with the following details.

  • Lease term: 4 years.
  • Upfront fees: $5,000.
  • Annual lease payments: $17,286.
  • Lessee has option to purchase equipment for $1 at end of lease.

Required Note: For the following questions, round your answers to the nearest whole dollar; use rounded amounts for further calculations. a. Given the lease contract facts, determine the classification for each of the two leases (operating or finance). Land lease: AnswerOperating leaseFinance lease Computer equipment lease: AnswerOperating leaseFinance lease b. Determine the amount of the lease liability that Alexander Mack will add to its balance sheet at the inception of each lease. The company has a 9% cost of debt capital. Land lease: $Answer Computer equipment lease: $Answer c. What asset will the company add to its balance sheet for each lease?

Land lease: AnswerRight-of-use assetPPELease assetN/A Answer
Computer equipment lease: AnswerRight-of-use assetPPELease assetN/A Answer

d. For each lease, prepare an amortization schedule that shows the interest and principal portions of each lease payment. Note: Adjust the final year for any rounding differences.

Land Lease: Implicit Interest Lease Amortization Lease Liability, End
Lease Liability, (Lease Liability, (Lease payment (Lease Liability, Start
Year Start Start x 9%) Implicit interest) Lease Amortization)
1 Answer Answer Answer Answer
2 Answer Answer Answer Answer
3 Answer Answer Answer Answer
4 Answer Answer Answer Answer
5 Answer Answer Answer Answer
6 Answer Answer Answer Answer
7 Answer Answer Answer Answer
8 Answer Answer Answer Answer
9 Answer Answer Answer Answer
10 Answer Answer Answer Answer
11 Answer Answer Answer Answer
12 Answer Answer Answer Answer
13 Answer Answer Answer Answer
14 Answer Answer Answer Answer
15 Answer Answer Answer Answer

Computer equipment lease: Implicit Interest Lease Amortization Lease Liability, End
Lease Liability, (Lease Liability, (Lease payment (Lease Liability, Start
Year Start Start x 9%) Implicit interest) Lease Amortization)
1 Answer Answer Answer Answer
2 Answer Answer Answer Answer
3 Answer Answer Answer Answer
4 Answer Answer Answer Answer

e. What will be the income statement effect of the land lease in 2020? $Answer of expense f. What will be the income statement effect of the equipment lease in 2020? $Answer of expense g. For fiscal 2020, what additional disclosure would Alexander Mack make in its footnotes pertaining to the remaining land lease payments?

December 2020
2021 Answer
2022 Answer
2023 Answer
2024 Answer
2025 Answer
Thereafter Answer
Total undiscounted lease payments Answer
Imputed interest Answer
Total operating lease liability Answer
Weighted average remaining lease life in years Answer
Weighted average discount rate Answer

h. On December 31, 2021, what amount will be on the balance sheet (asset and liability) for each of the leases?

Asset Liabilities
Land lease: Answer Answer
Computer equipment lease: Answer Answer

Please answer all parts of the question.

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