(Questions 12 through 15) On January 1, 2018, Morris Production leased a machine from Werner Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee, and there is no purchase option or guarantee of a residual value by Morris. Payments are made annually starting with the beginning of the lease. The asset has an expected economic life of 24 years. Portions of the Werner Leasing's lease amortization schedule appear below: 008,1 Jan. 1000 Payments Effective Interest Outstanding Balance 374,596 8334,596 1582 328,056 Decrease in Balance 00A,S 2018 40,000 004.S 40,000 2018 40,000 33,460 6,540 2019 40,000 32,806 7,194 (n) earl 320,861 Inf 2020 40,000 32,086 7,914 312,947 2021 40,000 31,295 8,705 52 304,242 2022 40,000 30,424 9,576 driw seas! 294,666 2023 40,000 29,467 10,533 284,133 gain fortw senol sq sa 2035 40,000 9,948 30,052 69,422 2036 40,000 6,942 33,058 36,364 2037 40,000 3,636 36,364 12. What is the effective annual interest rate? A. 9%. B. 10%. C. 11%, 1051 D. 12%. 13. What amount would the lessee record as annual amortization on the right-of-use asset using the straight-line method? A. $15,623. dom B. $18,730. yldmol C. $16,748. d What D. $40,000. 14. What would be the outstanding balance after payment 20? A. $0. B. $2,028. C. $8,929. D. $40,000.