Operating and Finance/Sales Type Leases and the Statement of Cash Flows

On January 2, 2023, Benchmark Company leased equipment for a period of three years. The economic life of the asset is five years. On January 2, the first lease payment of $435,000 was paid. On December 31, the second lease payment of $435,000 was paid. For the second payment, $145,000 represented interest expense; the remaining $290,000 represented a reduction in principal.

1. If the lease is an operating lease for Benchmark Company, how do the lease payments affect their statement of cash flow at the end of 2023? If the lessor also classifies the lease as an operating lease, how do the lease payments affect their statement of cash flow at the end of 2023?

2. Alternatively, if the lease is a finance lease for Benchmark Company, how do the lease payments affect their statement of cash flow at the end of 2023? If the lessor also classifies the lease as a sales-type lease, how do the lease payments affect their statement of cash flow at the end of 2023?