Annual payments = $48,750 Purchased for / Fair Market Value of property at inception = $348,500 Payments begin 1/1/X3 Lease term = 4 years Estimated economic life = 6 years Annual interest rate = 2% Year end is December 31 The lease is non cancelable. There are no options to purchase or renew. The leased asset reverts back to the leasing company at the end of the lease. The leasing company routinely lease this type of property. Consider the journal entry required by the LESSEE at the inception of the lease. Also, consider the debt to asset ration which is computed as follows and assume the ratio prior to inception of the lease is: Total Debt divided by Total Assets = Debt to Asset Ratio $5,000,000/$3,000,000 = 1.6667 What impact does the journal entry at inception have on the debt ratio? increases it O decreases it O has not impact on it O unable to determine without more information