PROBLEM: On January 1, 2019 Day Co. leased a new machine from Part with the following pertinent information: Lease term 6 years Annual rental payable at the beginning of each year $50,000 Useful life of machine 8 years Day's incremental borrowing rate 15% Implicit interest rate in lease (known by Day) 12% Present value of annuity of 1 in advance for 6 periods at 12% 4.61 15% 4.35 The lease passes ownership of the machine to Day at the termination of the lease. The cost of the machine on Parr's accounting record is $375,500. Hint: see bottom of pages 839 - 841 (chapter 15) of your text book for an illustrative example. Please write your answers in the space provided in each question. QUESTIONS: 1. At the beginning of the lease term, Day should record a lease liability of a. $375,500 b. $230,500 c. $217,500 d. $0 . 2. Is this a capital or operating lease? 3. Record/Journalize the entry Day should make at the inception/beginning of the lease Jan 1, 2019 4. Record/journalize Day's lease payment at 1/1/2019 5. Record/journalize Day's annual interest payment for 2019 (use the effective interest rate method) 6. How much is Day's lease liability (how much he owes) at the end of 2019. 7. Record/journalize the depreciation @ the end of 2019