On December 31, 2019, Lessee Company entered into a finance lease for equipment last 6 years. Under the terms of the lease, the Lessee pays $20,000 twice per year. Lessees incremental borrowing rate is 8%. Lessees first payment was made December 31, 2019. The lease liability at start of the lease is $195,210.

Use this information for the next two questions.

37What effect do the entries to record the lease payment and interest expense on December 31, 2020 have cumulatively on the accounting equation?

Assets decrease, Liabilities increase, Stockholders Equity increases

Assets decrease, Liabilities decrease, Stockholders Equity increases

Assets no effect, Liabilities increase, Stockholders Equity decreases

Assets Decrease, Liabilities Decrease, Stockholders Equity decreases

Assets Decrease, Liabilities increase, Stockholders Equity decreases

38What is the balance of the lease liability on 12/31/2020?

$148,707

$120,042

$169,277

$162,755

$175,210