G H P20.14 (LO2, 4) Balance Sheet and Income Statement Disclosure-Lessor The following facts pertain to a noncancelable lease agreement between Alschuler Leasing Company and McKee Electronics, a lessee, for a computer system. Commencement date Lease term Economic life of leased equipment Fair value of asset at October 1, 2025 Book value of asset at October 1, 2025 Residual value at end of lease term Lessor's implicit rate October 1, 2025 6 years 6 years $ 313,043 SS 280,000 SO 8% Lessee's incremental borrowing rate 8% Annual lease payment due at the beginning of each year, beginning with October 1, 2025 $ 62,700 The collectability of the lease payments is probable by the lessor. The asset will revert to the lessor at the end of the lease term. The straight-line depreciation method is used for all equipment. The following amortization schedule has been prepared correctly for use by both the lessor and the lessee in accounting for this lease. The lease is to be accounted for properly as a finance lease by the lessee and as a sales-type lease by the lessor. Interest (8%) on Unpaid Lease Liability/ Reduction of Balance of Lease Date Payment/ Receivabl Receipt Lease Liability/ e Receivable Liability/ Receivable 10/01/25 $ 313,043 10/01/25 $ 62,700 $ 62,700 250,343 10/01/26 62,700 $ 20,027 42,673 207,670 10/01/27 62,700 16,614 46,086 161,584 10/01/28 62,700 12,927 49,773 111,811 10/01/29 62,700 8,945 53,755 58,056 10/01/30 62,700 4,644 58,056 0 $ 376,200 $63,157 $ 313,043 a. Assuming the lessor's accounting period ends on September 30, answer the following questions with respect to this lease agreement. 1. 2. 3. 4. What items and amounts will appear on the lessor's income statement for the year ending September 30, 2026? What items and amounts will appear on the lessor's balance sheet at September 30, 2026? What items and amounts will appear on the lessor's income statement for the year ending September 30, 2027? What items and amounts will appear on the lessor's balance sheet at September 30, 2027? b. Assuming the lessor's accounting period ends on December 31, answer the following questions with respect to this lease agreement. 1. 2. 3. What items and amounts will appear on the lessor's income statement for the year ending December 31, 2025? What items and amounts will appear on the lessor's balance sheet at December 31, 2025? What items and amounts will appear on the lessor's income statement for the year ending December 31, 2026? What items and amounts will appear on the lessor's balance sheet at December 31, 2026? NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell), into the yellow shaded input cells. Amounts may differ from the solutions manual due to rounding resulting from more 3 precise calculations in Excel. 1 Instructions: 2 a. 1. 3 54 5 Interest expenses lease executory expense depreciation expense Current assets: 56 2. 57 58 69 Noncurrent assets: 70 71 72 3. 73 74 4. Current assets: 75 76 77 Noncurrent assets: 78 79 80 81 b. 1. 82 83 84 85 2. Current assets: 86 87 88 Noncurrent assets: 89 90 91 3. 92 F 93 4. Current assets: 94 95 96 Noncurrent assets: 97 98 90 S 5,007