Byte Inc. made a five-year lease of server machine on 1 March 20X5 which has a useful life of 8 years with no residual value. The lease had the following terms: -

1. The annual lease payment is $6,000, in which the first payment will be made on 1 March 20X5.
2. Byte incurred $2,500 direct administrative costs to finalise the lease contract, in which, the amount is before they receive $800 reimbursement from the lessor.
3. The implicit rate of the lease is 4%.
4. The present value of the minimum lease payment is $23,000.

Required:

1. With full workings and amortisation table, show how the lease of Byte Inc. will be accounted for in the financial statements over the five-year period.
2. Will there be any change of depreciation policy if the ownership transfers to Byte Inc. and why? (No workings are needed).