Problem 21-5 The following facts pertain to a noncancelable lease agreement between Swifty Leasing Company and McKee Electronics, a lessee, for a computer system. October 1, on date 2017 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at October 1, 2017 $286,968 Residual value at end of lease term Lessor's implicit rate 10 Lessee's incremental borrowing rate 10 Annual lease payment due at the beginning each year, beginning with October 1, 2017 $59,900 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 $4,100 per year and are to be paid each October 1, beginning October 1, 2017. (This $4,100 is not included in the rental payment of $59,900.) 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 lesson. Annual Lease nterest (10%) on Unpa Reduction of Balance of Lease Date ment/Receipt Liabi Receivable Liabi Receivable Liabi Receivabl 10/01/17 $286 r968 10/01/17 59,900 $59,900 227.068 59,900 189,875 10/01/18 $22,707 37,193 10/01/19 59,900 18,988 40,912 148,963 10/01/20 59,900 14,896 45,004 103,959 10/01/21 59,900 10,396 49,504 54,455 10/01/22 59,900 5,445 54,455 $359,400 $72,432 $286,968