Youll use this information to answer three questions. On January 1, 2016, Burton Company leases equipment for an annual lease rental of $45,000. The lease term is five years, and the lessors interest rate implicit in the lease is 9%. The useful life of the equipment is five years, and its estimated residual value is zero.

1. If this is an Operating Lease, then what will be the value of the asset on the Balance Sheet at the end of 2017?

		$164,008
		$175,034
		Less than the value of the liability
		Zero
		$210,618

2. If this is a Capital Lease, then what will be the value of the liability on the Balance Sheet at the end of 2017?

		$99,851
		$104,973
		$113,908
		Equal to the value of the asset
		$133,651

3.

If this is an Operating Lease rather than a Capital Lease, then what will be the DIFFERENCE in the total expenses charged on the Income Statement for 2017?

		$5,760
		$3,188
		$4,444
		Zero
		$3,128