Montana Inc. sells computer systems. Montana leases computers to Utah Company on June 30, 2017. The computers cost Montana $12 million to manufacture. The lease is non-cancelable and has the following terms: Lease payments: $2,466,754 semiannually; first payment due June 30, 2017; remaining payments due December 31 and June 30 each year through December 31, 2021. Lease term: 5 years (10 semi-annual payments). No residual value; no bargain purchase option. Economic life of equipment: 5 years. Implicit interest rate and lessee's incremental borrowing rate: 10% per year. Fair value of the computers at June 30, 2017: $20 million. Collectability of the rental payments is reasonably assured, and there are no lessor costs yet to be incurred.

Montana would account for this lease as: A) A capital lease. B) A direct financing lease. C) A sales type lease. D) An operating lease.

Utah Company would account for this lease as: A) A capital lease. B) A direct financing lease. C) A sales type lease. D) An operating lease.

The net carrying value of the lease liability on Utah's books after the December 31, 2017 payment is closest to: A) $15,943,154 B) $17,533,246 C) $21,000,000 D) $15,066,492

13. Total interest revenue Montana would report on its year end December 31, 2017 income statement relative to this lease is closest to: A) $4,933,508 B) $1,673,820 C) $876,662 D) $2,466,754