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Please answer the bolded question below using the information provided. Please write answer clearly, preferably typed if possible. QUESTION 1 Information for Questions 1 -
Please answer the bolded question below using the information provided.
Please write answer clearly, preferably typed if possible.
QUESTION 1 Information for Questions 1 - 4 Mathey Corporation (lessee) signed a 4-year lease with Zimmerman Co. for groundskeeping equipment. The lease term begins on January 1, 2019 and calls for 4 equal payments of $85,000 to be made at the beginning of each year. The fair value of the equipment was $320,000 at the inception of the lease. The machine is expected to have a 6-year useful life with no salvage value. Ownership of the equipment will transfer to Mathey at the end of the lease term. The following amortization schedule has been prepared to reflect the lease liability: Lease Lease Liability Liability Payment Interest Reduction Remaining $300,160 $ $ 1/1/2019 85,000 - $ 85,000 215,160 1/1/2020 85,000 19,364 65,636 149,524 1/1/2021 85,000 13,457 71,543 77,982 1/1/202285,000 7,018 77,982 340,000 39,840 $ 300,160 65,0 Document the tests to determine the proper treatment of this lease and indicate if the lease should be considered operating or financingStep by Step Solution
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