Problem 21-5 The following facts pertain to a noncancelable lease agreement between Sarasota Leasing Company and McKee Electronics, a lessee, for a computer system. Inception date October 1, 2017 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at October 1, 2017 $255,349 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 of $53,300 each year, beginning with October 1, 2017 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 executor costs, which amount to $6,700 per year and are to be paid each October 1, beginning October 1, 2017. (This $6,700 is not included in the rental payment of $53,300.) The asset will revert to the lessor at the en 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. Annual Lease Interest (10%) on Unpaid Reduction of Lease Balance of Lease Date Payment/Receipt Liability Receivable Liability/Receivable Liability/Receivable 0/01/17 $255,349 10/01/17 53,300 53,300 $53,300 202,049 33,095 168,954 132,549 10/01/18 20,205 10/01/19 53,300 16,895 36,405 10/01/20 53,300 13,255 40,045 92,504 10/01/21 44,050 48,454 53,300 9,250 48,454 53,300 4,846 10/01/22 0- (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,Beta Rectangular Snip Balance Sheet (Partial) September 30, 2018 Current Assets Noncurrent Assets (3) What items and amounts will appear on the lessor's income statement for the year ending September 30, 2019? (4) What items and amounts will appear on the lessor's balance sheet at September 30, 2019? Balance Sheet (Partial) September 30, 2019 Current Assets Noncurrent Assets (1) What items and amounts will appear on the lessor's income statement for the year ending December 31, 2017? (2) What items and amounts will appear on the lessor's balance sheet at December ular Snip Balance Sheet (Partial) December 31, 2017 Current Assets Noncurrent Assets (3) What items and amounts will appear on the lessor's income statement for the year ending December 31, 2018? (4) What items and amounts will appear on the lessor's balance sheet at December 31, 2018? Balance Sheet (Partial) December 31, 2018 Current Assets Noncurrent Assets
