On 1/1/2012 ABC, Inc. enters into a 10-year non-cancelable lease for a piece of machinery owned by XYZ, Inc. The lease calls for annual payments of $10,000, payable at the beginning of each year of the lease (first payment due on 1/1/2012). At the end of the lease, ownership transfers to ABC, Inc. XYZ, Inc. purchased this machine on 12/31/2011 for $46,320, and the economic life of the machine is believed to be 20 years. Both ABC, Inc. and XYZ, Inc. use an 8% discount rate to calculate present values.

What type of lease is this from the perspective of XYZ, Inc. ?

Group of answer choices Capital - Direct Financing Lease Capital - Sales Type Lease Operating

What (if any) journal entry(ies) should XYZ, Inc. record on 1/1/2012 (Note, you can

ignore depreciation)?

Assuming that XYZ, Inc. prepares financial statements annually on 12/31, what (if

any) journal entry(ies) should XYZ, Inc. record on 12/31/2012 (Note, you can ignore depreciation)?

How much is XYZ, Inc.s net income impacted as a result of this lease in 2012?