Problem 21-5 (Part Level Submission)

The following facts pertain to a non cancelable lease agreement between Culver Leasing Company and McKee Electronics, a lessee, for a computer system.

Inception date October 1, 2017Lease term6years Economic life of leased equipment6years Fair value of asset at October 1, 2017$250,291Residual value at end of lease term-0-Lessor's implicit rate11%Lessee's incremental borrowing rate11%Annual lease payment due at the beginning ofeach year, beginning with October 1, 2017$53,300

The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs, which amount to $5,200per year and are to be paid each October 1, beginning October 1, 2017. (This $5,200is not included in the rental payment of $53,300.) The asset will revert to the lessor at the end of the lease term. The straight-line depreciation method is used for all equipment.

The following amortization schedule has been prepared correctly for use by both the lessor and the lessee in accounting for this lease. The lease is to be accounted for properly as a capital lease by the lessee and as a direct-financing lease by the lessor.

Assuming the lessor's accounting period ends on September 30, answer the following questions with respect to this lease agreement.(Round answers to 0 decimal places e.g. 58,971.)

(1)What items and amounts will appear on the lessor's income statement for the year ending September 30, 2018?

(2)What items and amounts will appear on the lessor's balance sheet at September 30, 2018?

(3)What items and amounts will appear on the lessor's income statement for the year ending September 30, 2019?