Problem 16-21 (Algo) Financial statement effects of leases [LO 16-4]

The Harris Company is the lessee on a four-year lease with the following payments at the end of each year:

Year 1:	$ 18,500
Year 2:	$ 23,500
Year 3:	$ 28,500
Year 4:	$ 33,500

An appropriate discount rate is 7 percentage, yielding a present value of $86,637.

a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset?

a-2. If the lease is an operating lease, what will be the initial value of the lease liability?

a-3. If the lease is an operating lease, what will be the lease expense shown on the income statement at the end of year 1?

a-4. If the lease is an operating lease, what will be the interest expense shown on the income statement at the end of year 1?

Note: Leave no cells blank be certain to enter 0 wherever required.

a-5. If the lease is an operating lease, what will be the amortization expense shown on the income statement at the end of year 1?

Note: Leave no cells blank be certain to enter 0 wherever required.

b-1. If the lease is a finance lease, what will be the initial value of the right-of-use asset?

b-2. If the lease is a finance lease, what will be the initial value of the lease liability?

b-3. If the lease is a finance lease, what will be the lease expense shown on the income statement at the end of year 1?

Note: Leave no cells blank be certain to enter 0 wherever required.

b-4. If the lease is a finance lease, what will be the interest expense shown on the income statement at the end of year 1?

Note: Round your answer to the nearest dollar amount.

b-5. If the lease is a finance lease, what will be the amortization expense shown on the income statement at the end of year 1?

Note: Round your answer to the nearest dollar amount.

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