Lake Manufacturing Co. is considering alternative financing arrangements for equipment used in its warehouses. Besides purchasing the equipment outright, Lake is also considering a lease. Accounting for the outright purchase is fairly straightforward, but because Lake has not used equipment leases in the past, the accounting staff is less informed about specific accounting rules for leases. The staff is aware of some general lease rules related to right-of-use, but they are unsure how the accounting rules apply to their situation. Lake has asked you to conduct some research on these items related to lease capitalization criteria.

Access the FASB Accounting Standards Codification System using the information provided in the Announcements pages and prepare responses for the following using the new Leases standard (ASC 842), providing appropriate codification references in your report.

a) What is included in the measure of the (1) lease liability and (2) right-of-use asset?

b) Besides the non-cancelable term of the lease, what other considerations determine the lease term?

c) When should a lessee account for a lease modification? What procedures are followed?