The following facts pertain to a non-cancelable lease agreement between Alschuler Leasing Company and McKee Electronics, a lessee, for a computer system.

The lessee assumes responsibility for all executory costs, which amount to £5,500 per year and are to be paid each October 1, beginning October 1, 2015. (This £5,500 is not included in the rental payment of £62,700.) The asset will revert to the lessor at the end of the lease term. The straight-line depreciation method is used for all equipment.
The following amortization schedule has been prepared correctly for use by both the lessor and the lessee in accounting for this lease. The lease is to be accounted for properly as a finance lease by the lessee and as a direct-financing lease by the lessor.

Instructions (Round all numbers to the nearest pound.)

(a) Assuming the lessee’s accounting period ends on September 30, answer the following questions with respect to this lease agreement.

(1) What items and amounts will appear on the lessee’s income statement for the year ending September 30, 2016?
(2) What items and amounts will appear on the lessee’s statement of financial position at September 30, 2016?
(3) What items and amounts will appear on the lessee’s income statement for the year ending September 30, 2017?
(4) What items and amounts will appear on the lessee’s statement of financial position at September 30, 2017?

(b) Assuming the lessee’s accounting period ends on December 31, answer the following questions with respect to this lease agreement.
(1) What items and amounts will appear on the lessee’s income statement for the year ending December 31, 2015?
(2) What items and amounts will appear on the lessee’s statement of financial position at December 31, 2015?
(3) What items and amounts will appear on the lessee’s income statement for the year ending December 31, 2016?
(4) What items and amounts will appear on the lessee’s statement of financial position at December 31, 2016?

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Inception date Lease term Economic life of leased equipment Fair value of asset at October 1, 2015 Residual value at end of lease term Lessor's Implicit rate Lessee's Incremental borrowing rate Annual lease payment due at the beginning of each year, beginning with October 1, 2015 October 1, 2015 6 years 6 years 300,383 -a 10% 10% 62,700