Identify and analyze the transaction by using the following steps: 1. Determine activity operating, investing or financing. 2. Determine accounts affected and the amount of increases/decreases. 3. Determine the financial statements affected balance sheet, income statement. The accounting equation must balance for each transaction. Determine amortization using the effective interest method (see Exhibit 10-7 below for an example).

Date	Column 1 Lease Payment	Column 2 Interest Expense	Column 3 Reduction of Obligation	Column 4 Lease Obligation
		8%	Col. 1 - Col. 2
1/1/2017	-	-	-	$15,972
12/31/2017	$4,000	$1,278	$2,722	13,250
12/31/2018	4,000	1,060	2,940	10,310
12/31/2019	4,000	825	3,175	7,135
12/31/2020	4,000	571	3,429	3,706
12/31/2021	4,000	294	3,706	0

Column 1 is the total amount of the payment. To compute the interest expense, (column 2) multiply the lease obligation (column 4) by the interest rate. Column 3, the reduction of obligation is computed by subtracting Column 2 from column 1. Column 4 starts out as the present value of the lease obligation. This column is then reduced by the amount in column 3.

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How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Round answers to the nearest whole dollar.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

CashInterest ExpenseInterest PayableInterest RevenueLeased AssetNo EntryCash

fill in the blank 22e6aff63fdbf81_2

CashLease ObligationLeased AssetLeased Asset ExpenseRent ExpenseNo EntryLease Obligation

fill in the blank 22e6aff63fdbf81_4

fill in the blank 22e6aff63fdbf81_5

CashLease ObligationLeased AssetLeased Asset ExpenseRent ExpenseNo EntryNo Entry

fill in the blank 22e6aff63fdbf81_7

CashInterest ExpenseInterest PayableInterest RevenueLeased AssetNo EntryInterest Expense

fill in the blank 22e6aff63fdbf81_9

fill in the blank 22e6aff63fdbf81_10

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c. Calculate the amount of depreciation expense for the year 2017. Round answer to the nearest whole dollar. $fill in the blank 7a0782095fd700c_1

d. At what amount would the lease obligation be presented on the balance sheet as of December 31, 2017? Round answers to the nearest whole dollar.

Current liability portion	$fill in the blank 7a0782095fd700c_2
Long-term liability portion	$fill in the blank 7a0782095fd700c_3