Answer:
1.)
Right to use assets = Present value of lease payments
= $30000 * cumulative PV factor for annuity due at 12% for 9 periods
= $30000 * 5.9676 = $179028
Interest expense for first year = ($179028 - $30000) * 12% = $17883
Amortization for the year = $179028 / 9 = $19892
Effect on earnings for first year = Interest expense + Amortization expense = -$17883 - $19892 = ($37775)
2.)
Lease payable balance (End of year) = beginning balance + Interest expense - Payments
= $179028 + $17883 - $30000 - $30000 = $136911
Right of use asset balance (end of year) = Beginning balance - Amortization
= $179028 - $19892 = $159136
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