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On January 1, Year1 Garret Trucking Company leased a semitractor and trailer for five years. Annual payments of $ 31307 are to be made every

On January 1, Year1 Garret Trucking Company leased a semitractor and trailer for five years. Annual payments of $31307 are to be made every December 31, beginning December 31, Year1. Interest expense is based on a rate of 8%. The present value of thelease payments is $125000 and has been determined to be greater than 90% of the fair market value of the asset on January 1, Year1. Garret has computed the following amortization table for the lease liability:

Date

Lease Payment

Interest Expense

Reduction of Obligation

Lease Obligation

1/01/Yr1

125000

12/31/Yr1

31307

10000

21307

103693

12/31/Yr2

31307

8295

23012

80681

12/31/Yr3

31307

6454

24853

55828

12/31/Yr4

31307

4466

26841

28987

12/31/Yr5

31307

2320

28987

0

1. What will Garrett report as a Right-of-use asset at the inception of the lease?

2. What is total expense reported with respect to this lease for Year1 (include interest expense and amortization expense for the right-of-use asset.)

3. What is total expense reported with respect to this lease for Year2 (include interest expense and amortization expense for the right-of-use asset.)

4. Complete the following sections of the company's balance sheet at December 31, Yr3.

Assets: Right-of-use asset

Liabilities: Lease liability:

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