Harry Potter Barn (HPB) leased equipment from Sorcerer's Leasing Co. on July 1, 2018, in a finance lease. The present value of the lease payments discounted at 10% was $80,000. Ten annual lease payments of $12,000 are due each July 1, beginning July 1, 2018. The total decrease in earnings (pretax) inHPBs Dec. 31, 2018, income statement would be:

a. $6,000.

b. $7,400.

c. $8,400.

d. $9,000.

Harry Potter Barn (HPB) leased equipment from Sorcerer's Leasing Co. on July 1, 2018, in an operating lease. The present value of the lease payments discounted at 10% was $80,000. Ten annual lease payments of $12,000 are due each July 1, beginning July 1, 2018. The total decrease in earnings (pretax) inHPBs Dec. 31, 2018, income statement would be:

a. $6,000.

b. $7,400.

c. $8,400.

d. $9,000.

On January 1, 2018, Super Sports Supply recorded a right-of-use asset of $135,180 in an operating lease. The lease calls for ten annual payments of $20,000 at the beginning of each year. The interest rate charged by the lessor was 10%. The balance in the right-of-use asset at December 31, 2018, will be:

a. $115,180.

b. $121,662.

c. $126,698.

d. $135,180.

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