Question

A lease agreement that qualifies as a finance lease calls for annual lease payments of $16,000 over a four-year lease term (also the asset's useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 5%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: a. Complete the amortization schedule for the first two payments. b. If the lessee's fiscal year is the calendar year, what would be the amount of the lease liability that the lessee would report in its balance sheet at the end of the first year? What would be the interest payable? Complete this question by entering your answers in the tabs below. Required A Required B If the lessee's fiscal year is the calendar year, what would be the amount of the lease liability that the lessee would report in its balance sheet at the end of the first year? What would be the interest payable? (Round your answers to the nearest whole dollar.) Lease liability Interest payable < Required A Required B

Thank you for the effort to provide the solution, your help is appreciated!

Answer 1

	Initial balance, January 1	59,572
	($16,000 x 3.72325)
1	Date	Lease Payment	Effective Interest	Decrease in Balance	Outstanding Balance
	Jan 1, Year 1				59,572
	Jan 1, Year 1	16,000	-	16,000	43,572
	Jan 1, Year 2	16,000	2,179	13,821	29,751
2	Lease Liability	43,572
	Interest Payable	2,179