On January 1, 2018, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasings lease amortization schedule appear below:

Required:

1. What is Majestics lease liability at the beginning of the lease (after the first payment)?

2. What amount would Majestic record as a right-of-use asset?

3. What is the lease term in years?

4. What is the effective annual interest rate? (Round your percentage answers to 1 decimal place.)

5. What is the total amount of lease payments?

6. What is the total effective interest expense recorded over the term of the lease?

Jan. 1 Payments Effective Interest 2018 2018 2019 2020 2021 2022 2023 2024 22,000 22,000 22,000 22,000 22,000 22,000 22,000 18,403 18,043 17,647 17,212 16,733 16, 207 Decrease in Outstanding Balance Balance 206,028 22,000 184,028 3,597 180,431 3,957 176,474 4,353 172,121 4,788 167,333 5, 267 162,067 5,793 156,273 -- 2035 2036 2037 22,000 22,000 22,000 5,471 3,818 2,000 16,529 18,182 19,999 38,181 19,999