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 detalls followi

Lease term: $15$ years.

Upfront fees: $$450,000$ pald in cash

Annual lease payment: $$475,000$ 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: $$23,459.$

Lessee has option to purchase equipment for $$1$ at end of lease.

Required

Note: For the following questians, round your answers to the nearest whole dollar; use rounded amounts for further calculations

a$.$ Given the lease contract facts, tdetermine the classification for each of the two leases $($operating or finance$).$

Land lease:

Computer equipment lease: Finance lease $$

b$.$ Determine the ampunt 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: $

Computer equipment lease:

c$.$ What asset will the company add to its balance sheet for each lease?

Land lease: $,$ Pight$-$of$-$use asset $=$$$4,278,827$

Comouner equigment lease: Lease asset $***81,001$

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.

e$.$ What will be the income sratement effect of the land lease in $2020?$

of expense

f$.$ What will be the income statement effect of the equipment lease in $2020?$

of expense

g$.$ For fiscal $2020,$ what additional disclosure would Alexander Mack make in its footnotes pertaining to the remaining land lease payments?

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