1. On January 1, 2018, Sammy Company signed a lease agreement for a standalone piece of nonspecialized equipment requiring five annual payments of $100,000, beginning January 1, 2019. The cost and fair value of the lease is $650,000 and has an economic life of 10 years with zero residual value at the end of the economic life. The lease does not contain a bargain purchase option and no agreement to transfer ownership at the end of the lease. Sammy's incremental borrowing rate was 9% and the lessor's implicit rate, known by Sammy, was 12%. The present value factors of an ordinary annuity of $1 for six periods for interest rates of 9% and 12% are 4.48592 and 4.037349, respectively.

What would be the balance of the right of use asset and lease obligation on January 1, 2018, for financial reporting purposes after the lease payment? (Round answers to the nearest dollar.)

1. $0
2. $403,735
3. $448,692
4. $463,379

2. Using the information in Question 1, what would be the interest expense for 2019 (round answers to the nearest dollar)?

1. $12,000
2. $41,831
3. $36,448
4. $40,373

3. Using the information in Question 1, what would be the balance of the lease obligation for financial reporting purposes on December 31, 2020, after the lease payment (round answers to the nearest dollar)?

1. $0
2. $269,005
3. $325,274
4. $290,423