Refer to the following lease amortization schedule. The ten payments are made annually at the beginning of each year starting with 1/1/y1. Title does not transfer to the lessee and there is no bargain purchase option or guaranteed residual value. The asset has an expected economic life of 15 years and the fair value of the asset at the lease inception date is $90,000. The lessee depreciates and amortizes on the straight-line basis with no salvage value.

payment	Cash payment	Effective Interest	Decrease in Balance	Balance
				63,282
1	10,000		10,000	53,282
2	10,000	6,394	3,606	49,676
3	10,000	5,961	4,039	45,637
4	10,000	5,476	4,524	41,113
5	10,000	4,934	5,066	36,047
6	10,000	4,326	5,674	30,373
7	10,000	3,645	6,355	24,017
8	10,000	2,882	7,118	16,899
9	10,000	2,028	7,972	8,927
10	10,000	1,073	8,927	0

5. The total annual expense for the lessee in the second year is: a. $10,000 b. $15,961 c. $16,394 d. $10,180

6. The interest rate implicit in the lease is: a. 10% b. 6% c. 12% d. 4%

7. The total liability to be reported for this lease on the balance sheet of the lessee at 12/31/y1 is: a. $53,282 b. $59,676 c. $49,676 d. $0

8. The value of the right-of-use asset reported by the lessee at 12/31/y1 is: a. $90,000 b. $56,954 c. $59,063 d. $59,676