The following facts pertain to a noncancelable lease agreement between Indigo Leasing Company and McKee Electronics, a lessee, for a computer system. October 1, 2017 6 years 6 years $367,702 Inception date Lease term Economic life of leased equipment Fair value of asset at October 1, 2017 Residual value at end of lease term Lessor's implicit rate Lessee's incremental borrowing rate Annual lease payment due at the beginning of each year, beginning with October 1, 2017 -0- 9 % 9 % $75,200 The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs, which amount to $4,600 per year and are to be paid each October 1, beginning October 1, 2017. (This $4,600 is not included in the rental payment of $75,200.) The asset will revert to the lessor at the end of the lease term. The straight-line depreciation method is used for all equipment. The following amortization schedule has been prepared correctly for use by both the lessor and the lessee in accounting for this lease. The lease is to be accounted for properly as a capital lease by the lessee and as a direct- financing lease by the lessor. Annual Lease Payment/Receipt Date 10/01/17 10/01/17 10/01/18 10/01/19 10/01/20 10/01/21 10/01/22 $ 75,200 75,200 75,200 75,200 75,200 75,200 $451,200 Interest (9%) on Unpaid Reduction of Lease Balance of Lease Liability/Receivable Liability/Receivable Liability/Receivable $367,702 $75,200 292,502 $26,325 48,875 243,627 21,926 53,274 190,353 17,132 58,068 132,285 11,906 63,294 68,991 6,209 68,991 -0- $83,498 $367,702 Assuming the lessor's accounting period ends on September 30, answer the following questions with respect to this lease agreement. (Round answers to 0 decimal places e.g. 58,971.) (1) What items and amounts will appear on the lessor's income statement for the year ending September 30, 2018? Balance Sheet (Partial) Current Assets $ $ Noncurrent Assets (3) What items and amounts will appear on the lessor's income statement for the year ending September 30, 2019? $ (4) What items and amounts will appear on the lessor's balance sheet at September 30, 2019? Balance Sheet (Partial) Current Assets $ $ Noncurrent Assets $ SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Assuming the lessor's accounting period ends on December 31, answer the following questions with respect to this lease agreement. (Round answers to 0 decimal places e.g. 58,971.) (1) What items and amounts will appear on the lessor's income statement for the year ending December 31, 2017? $ (2) What items and amounts will appear on the lessor's balance sheet at December 31, 2017? Balance Sheet (Partial) Current Assets $ $ Noncurrent Assets $ (3) What items and amounts will appear on the lessor's income statement for the year ending December 31, 2018? $ (4) What items and amounts will appear on the lessor's balance sheet at December 31, 2018? Balance Sheet (Partial) Current Assets $ $ Noncurrent Assets $
