The following facts pertain to a noncancelable lease agreement between Concord Leasing Company and McKee Electronics, a lessee, for a computer system. October 1, 2017 6 years 6 years $261,098 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- 10 % 10 % $54,500 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 $4,700 per year and are to be paid each October 1, beginning October 1, 2017. (This $4,700 is not included in the rental payment of $54,500.) 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 Interest (10%) on Unpaid Reduction of Lease Balance of Lease Date Payment/Receipt Liability/Receivable Liability/Receivable Liability/Receivable 10/01/17 $261,098 10/01/17 $ 54,500 $54,500 206,598 10/01/18 54,500 $20,660 33,840 172,758 10/01/19 54,500 17,276 37,224 135,534 10/01/20 54,500 13,553 40,947 94,587 10/01/21 54,500 9,459 45,041 49,546 10/01/22 54,500 4,954 49,546 $327,000 $65,902 $261,098 -0- 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? 20660 Interest Revenue (2) What items and amounts will appear on the lessor's balance sheet at September 30, 2018? Balance Sheet (Partial) September 30, 2018 Current Assets Lease Receivable 33840 $ Interest Receivable 20660 $ Noncurrent Assets Lease Receivable 1727581 $ (3) What items and amounts will appear on the lessor's income statement for the year ending September 30, 2019? 17276 Interest Revenue 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? Interest Revenue (2) What items and amounts will appear on the lessor's balance sheet at December 31, 2017? Balance Sheet (Partial) December 31, 2017 Current Assets Lease Receivable Interest Receivable Noncurrent Assets Lease Receivable (3) What items and amounts will appear on the lessor's income statement for the year ending December 31, 2018? Interest Revenue (4) What items and amounts will appear on the lessor's balance sheet at December 31, 2018? Balance Sheet (Partial) December 31, 2018 Current Assets Lease Receivable Interest Receivable Noncurrent Assets X Lease Receivable $
