Problem 21-5

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

Inception dateOctober 1, 2017Lease term6yearsEconomic life of leased equipment6yearsFair value of asset at October 1, 2017$319,783Residual value at end of lease term-0-Lessor's implicit rate9%Lessee's incremental borrowing rate9%Annual lease payment due at the beginning ofeach year, beginning with October 1, 2017$65,400

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 $6,100per year and are to be paid each October 1, beginning October 1, 2017. (This $6,100is not included in the rental payment of $65,400.) 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.

Part 1 - Partially Solved

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.)

Part 1