On June 1, 2015, Grumbler Corp. (Grumbler) signed a ten-year lease for five small airplanes. The lease requires Grumbler to make annual lease payments of $500,000 on May 31 of each year beginning in 2016. The lease is to be treated as a capital lease.

Required:

a. Indicate the amount that would be recorded for airplanes and for the lease liability on June 1, 2015, assuming the appropriate interest rate for the lease was i. 7 percent ll. 9 percent ili. 11 percent

b. Indicate the annual depreciation expense for the airplanes, assuming straight-line depreciation over 10 years and assuming the appropriate interest rate for the lease was i. 7 percent ii. 9 percent iii. 11 percent

c. Indicate the interest expense pertaining to the lease in the fiscal year ended May 31, 2016, assuming the appropriate interest rate for the lease was 1. 7 percent ll. 9 percent iil. 11 percent