George (lessee) leased a tractor with a useful life of 15 years from RentalCo (lessor) on January 1, 2015. RentalCo approximated a 12% rate when crafting the lease agreement, but George was not privy to that information. The equipment has a fair value of $190,000 and RentalCos cost is $172,000. A third party has guaranteed the residual value $12,000. RentalCo paid $3,000 in legal fees during December 2014 prior to executing the lease agreement. Georges incremental borrowing rate is 10%. Under the lease agreement, ten annual lease payments of $27,480 are due each January 1, beginning January 1, 2015. George paid $1,500 of initial direct costs (commission paid to a lease negotiator).

a) What is the balance of the ROU Asset on Georges 12/31/15 balance sheet?

b) What is the balance of the Lease Liability on Georges 12/31/15 balance sheet?

c) Ignoring taxes, what is the total expense related to the lease reported on George's 2015 income statement?