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 $16,000 on December 31 of each year beginning on December 31, 2016. Rumsfeld has the option to purchase the machine on December 31, 2019, for $20,000 when its fair value is expected to be $30,000. The machine's estimated useful life is expected to be five 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

1.) calculate the amount to be recorded as a leased asset and the associated lease liabiility.

2.) Prepare an amortization schedule for this lease.

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