Use the following data to about Johnson Company to answer question:

Johnson Company purchases an asset for $69,302 to lease to Carver, Inc. for four years with an annual lease payment of $20,000 at the end of each year. At the end of the lease, Carver will own the asset for no additional payment. The implied interest rate in the lease is 6%.

In 2007 Johnson Company had this financial statement data on its accounts:

Net income	$4,590
Depreciation	7,750
Taxes paid	5,322
Interest paid	1,500
Dividends paid	2,910
Cash received from sale of company building	3,455
Sale of preferred stock	4,355
Repurchase of common stock	3,000
Purchase of machinery	2,800
Issuance of bonds	5,000
Debt retired through issuance of common stock	4,500
Paid off long-term bank borrowings	9,000
Profit on sale of building	1,250

On January 1, 2008, Johnson Company acquires 80% of the common stock of Company S by paying $10,000 in cash to the shareholders of Company S. The pre-acquisition balance sheets are as follows:

Pre-acquisition B/S January 1, 2010	Johnson Company	Company S
Current assets	$58,000	$24,000
Other assets	22,000	11,000
Total	$80,000	$35,000
Current liabilities	$42,000	$21,000
Common stock	24,000	9,000
Retained earnings	14,000	5,000
Total	$80,000	$35,000

a)Determine how Johnson should account for the lease payments from Carver. Calculate the initial liability/asset reported on the balance sheet.

b)Prepare the amortization table for the lease and explain your answers.

c)Assuming US GAAP calculate CFO, CFF and CFI for Johnson company for year 2007. Please explain your calculations.

d)Prepare the post-acquisition balance sheet for Johnson Company using equity method. Please explain your answer (you are expected to prepare the balance sheet in the right format).

e)Prepare the post-acquisition balance sheet for Johnson Company using acquisition method. Please explain your answer (you are expected to prepare the balance sheet in the right format).