On January $1$ of Year $1,$ Wayne Inc. signed an eight$-$year lease for office space for $$48,000$ annually due each January $1,$ with the first payment due

immediately. Wayne has the option to renew the lease for an additional four$-$year period on or before January $1$ of Year $9,$ at market lease rates at the

time of renewal. The remaining economic life of the office is $30$ years. Wayne Inc. is not aware of the implicit rate of the lease but has an incremental

borrowing rate of $7\%.$ Wayne Inc. paid $$2,000$ on January $1$ of Year $1$ for initial direct costs.

Required

a$.$ How would Wayne Inc. classify the lease?

b$.$ Prepare a schedule of the lease liability for the first two years of the lease term.

Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule.

Please answer all parts of the question.

c$.$ Prepare a schedule of the right$-$of$-$use asset for the first two

Note: Round each amount in the schedule to the nearest wh

Please answer all narts of the question.