PROBLEM IV (12 pts total) : Peters, Inc. leased equipment from Armstrong Company under a five-year lease requiring equal annual payments of $250,000, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 5-year useful life and no salvage value. Peterss incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Peters, Inc.) is 8%

Required: a. What is the amount recorded for the Right-of-Use Asset at the lease inception?

b. Show the lease amortization table for the first two years of the lease arrangement.

c. Assuming that this lease is properly classified as a finance lease, what is the amount of interest expense recorded by Peters in the first year of the assets life?

d. Assuming that this lease is properly classified as a finance lease, what is the amount of Lease Liability reduction recorded in first year after the lease inception. (Show your calculation.) e. Peters uses the straight-line method to amortize similar assets. What is the amount of amortization expense recorded by Peters in the first year of the assets life?