Second (80%): On Dec 31, 2016, Gulf Corporation signed a four-year lease for an equipment. The lease called for annual payments of $41,000 per year at Dec.31, of each year. The leased equipment's expected economic life is five years, with no residual value, and depreciated on a straight-line basis. The fair value of the leased equipment is $144,266, and the appropriate rate for discounting the MLP is 10% (The PV of an ordinary annuity of $1 for 4 periods at 10% is 3.16986) The Gulf financial manager was surprised to learn that if the lease would be qualified as a finance capital lease, this would adversely affect certain financial ratio, and other accounting measures. If these effects are excessive, the manager is thinking of getting similar equipment to be qualified as operating lease. Required: 1. Explain and discuss the effect of lease capitalization would have on the company current ratio, given that before factoring in the capital lease signed on Dec. 31, 2016, the Gulf Corporation's current ratio on that date was 2 : 1 (Current Assets $300,000/Current Liabilities $150,000)