The following facts pertain to a noncancelable lease agreement between Alschuler Leasing Company and McKee Electronics, a lessee, for a computer system.

Inception date		October 1, 2014
Lease term		6	years
Economic life of leased equipment		6	years
Fair value of asset at October 1, 2014		$262,501
Residual value at end of lease term		0
Lessors implicit rate		11	%
Lessees incremental borrowing rate		11	%
Annual lease payment due at the beginning of
each year, beginning with October 1, 2014		$55,900

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 $6,800 per year and are to be paid each October 1, beginning October 1, 2014. (This $6,800 is not included in the rental payment of $55,900.) 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.

Date		Annual Lease Payment/Receipt		Interest (11%) on Unpaid Liability/Receivable		Reduction of Lease Liability/Receivable		Balance of Lease Liability/Receivable
10/01/14								$262,501
10/01/14		$55,900				$55,900		206,601
10/01/15		55,900		$22,726		33,174		173,427
10/01/16		55,900		19,077		36,823		136,604
10/01/17		55,900		15,026		40,874		95,730
10/01/18		55,900		10,530		45,370		50,360
10/01/19		55,900		5,540		50,360		0
		$335,400		$72,899		$262,501

(a) Assuming the lessees accounting period ends on September 30, answer the following questions with respect to this lease agreement.

(1) What items and amounts will appear on the lessees income statement for the year ending September 30, 2016?

(2) What items and amounts will appear on the lessees balance sheet at September 30, 2016?