Rumsfeld Corporation leased a machine on December 31, 2016, for a 3-year period. The lease agreement calls for annual payments in the amount of $20,000 on December 31 of each year beginning on December 31, 2016. Rumsfeld has the option to purchase the machine on December 31, 2019, for $24,000 when its fair value is expected to be $34,000. The machine's estimated useful life is expected to be six years with no residual value. Rumsfeld uses straight-line depreciation for this type of machinery. The appropriate interest rate for this lease is 12%.

n/i		PV of $1		PV, ordinary annuity		PV, annuity due
1 period, 12%		0.89286		0.89286		1.00000
2 periods, 12%		0.79719		1.69005		1.89286
3 periods, 12%		0.71178		2.40183		2.69005

Required:

1.	Calculate the amount to be recorded as a leased asset and the associated lease liability.
	LEASED ASSET/LIABILITY:________________________

2.

2. Prepare an amortization schedule for this lease

	Payments	Effective Interest	Decrease in Balance	Balance
Dec 31 2016
Dec 31 2017
Dec 31 2018
Dec 31 2019