Consider a non-cancellable lease beginning December 31, 20x0 with annual MLPs (minimum lease payments) of $10,000 made at the end of each year for 6 years. Assume 10% discount rate.

a.

(8 marks)

Calculate the B/S effects of lease classification for December 31, 20x2.

That is, complete the following table:

20x2

Assets

Leased asset 25,719

Acc. Depreciation 12,859.35

Leased asset, net 12,859

Liabilities

Current portion of lease obligation ?

Long-term debt: lease obligation ?

?

b.

(12 marks)

Calculate the cash flow effects of lease classification for each year.

That is, complete the following table:

	Operating Lease				Capital Lease
Year	CFO			CFO		CFF
20x1	10,000			?		?
20x2	10,000			?		?
20x3	10,000			?		?
20x4	10,000			?		?
20x5	10,000			?		?
20x6	10,000			?		?