On January 1, 2016, Concord Corp. signs a contract to lease manufacturing equipment from Stone Inc. Concord agrees to make lease payments of $47,500 per year. Additional information pertaining to the lease is as follows:

1.	The term of the noncancelable lease is 3 years, with a renewal option at the end of the lease term. Payments are due every January 1, beginning January 1, 2016.
2.	The fair value of the manufacturing equipment on January 1, 2016, is $150,000. The equipment has an economic life of 7 years.
3.	Concord guarantees that the equipment will have a residual value of $15,000 at the end of the lease term.
4.	Concord Corp. depreciates similar assets using the double-declining-balance method.
5.	Concords incremental borrowing rate is 15% per year; Stones implicit interest rate is 10.5% and known by Concord.
6.	Concord pays $2,500 per year for maintenance of the equipment and $1,000 in property taxes.

Required:

1.	Next Level Examine and evaluate each capitalization criteria and determine what type of lease this is for Concord.
2.	Calculate the amount of the asset and liability to be reported by Concord at the inception of the lease.
3.	Prepare a table summarizing the lease payments and interest expense.
4.	Prepare journal entries for Concord for the entire lease period. Assume that the equipment has a fair value of $9,500 at the end of the 3-year lease term.

Examine and evaluate each capitalization criteria and determine what type of lease this is for Concord.

Determine what type of lease this is for Concord.

Criteria	Met
Transfer of ownership at end of lease	yes or no?
Bargain purchase option	yes or no?
Lease term is 75% or more of economic life	yes or no?
Present value of lease payments is 90% or more of fair value	yes or no?

Determine what type of lease this is for Concord. Operating lease or capital lease?

Calculate the amount of the asset and iablity to be reported by Concord at the inception ot the lease Additional Instruction Prepare a table summarizing the lease payments and interest expense. Additional Instructions Concord Corp Summary of Lease Payments and Interest Expense 2016 2018 Interest at Balance of Annual Lease 10% on Date Capital Lease Payment Unpaid obligation Obligation 2January 1, 2016: Before the Initial Payment 3 January 1, 2016 4December 31, 2016 5 January 1, 2017 mber 31, 201 Dee January 1, 2018 December 31,2018 7