The Harris Company is the lessee on a four-year lease with the
following payments at the end of each year:
| Year 1: | $ | 17,000 |
| Year 2: | $ | 22,000 |
| Year 3: | $ | 27,000 |
| Year 4: | $ | 32,000 |
An appropriate discount rate is 7 percentage, yielding a present
value of $81,556.
a-1. If the lease is an operating lease, what will
be the initial value of the right-of-use asset?
a-2. If the lease is an operating lease, what will
be the initial value of the lease liability?
a-3. If the lease is an operating lease, what will
be the lease expense shown on the income statement at the end of
year 1?
a-4. If the lease is an operating lease, what will
be the interest expense shown on the income statement at the end of
year 1? (Leave no cells blank – be certain to enter “0”
wherever required.)
a-5. If the lease is an operating lease, what will
be the amortization expense shown on the income statement at the
end of year 1? (Leave no cells blank – be certain to enter
“0” wherever required.)
b-1. If the lease is a finance lease, what will be
the initial value of the right-of-use asset?
a-1. If the lease is an operating lease, the initial value of the right-of-use asset : $ 0
a-2: If the lease is an operating lease, the initial value of the lease liability : $ 0
a-3:If the lease is an operating lease, the lease expense shown on the income statement at the end of year 1: $ 17,000
a-4: If the lease is an operating lease, the interest expense shown on the income statement at the end of year 1: $ 0
a-5: If the lease is an operating lease, the amortization expense shown on the income statement at the end of year 1: $ 0
b-1: If the lease is a finance lease, the initial value of the right-of-use asset : $ 81,556
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