The following facts pertain to a noncancelable lease agreement between Alschuler Leasing Company and Sunland Electronics, a lessee, for a computer system. 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 October 1, 2017 6 years 6 years $253,109 -0- 11 % 11 % $53,900 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 $53,900.) 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 (11%) on Unpaid Reduction of Lease Balance of Lease Date Payment/Receipt Liability/Receivable Liability/Receivable Liability/Receivable 10/01/17 $253,109 10/01/17 $53,900 $53,900 199,209 10/01/18 53,900 $21,913 31,987 167,222 10/01/19 53,900 18,394 35,506 131,716 10/01/20 53,900 14,489 39,411 92,305 10/01/21 53,900 10,154 43,746 48,559 10/01/22 53,900 5,341 48,559 -0- $323,400 $70,291 $253,109 Assuming the lessee'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 lessee's income statement for the year ending September 30, 2018? $ $ $ (2) What items and amounts will appear on the lessee's balance sheet at September 30, 2018? Balance Sheet (Partial) Current Liabilities $ $ Long-term Liabilities Property, Plant and Equipment $ $ (3) What items and amounts will appear on the lessee's income statement for the year ending September 30, 2019? $ $ $ $ (4) What items and amounts will appear on the lessee's balance sheet at September 30, 2019? Balance Sheet (Partial) Current Liabilities $ $ Long-term Liabilities $ Property, Plant and Equipment $ $ Assuming the lessee'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 lessee's income statement for the year ending December 31, 2017? $ $ $ $ (2) What items and amounts will appear on the lessee's balance sheet at December 31, 2017? Balance Sheet (Partial) Current Liabilities $ $ Long-term Liabilities $ Property, Plant and Equipment $ $ Current Assets $ (3) What items and amounts will appear on the lessee's income statement for the year ending December 31, 2018? $ $ $ (4) What items and amounts will appear on the lessee's balance sheet at December 31, 2018? Balance Sheet (Partial) Current Liabilities $ $ Long-term Liabilities $ Property, Plant and Equipment $ $ Current Assets $
