Below are three independent lease scenarios. Payments are made at the beginning of each year.

Required:
1. Calculate the lease payments for the above three cases.
2. Explain whether each lease will be an operating lease or a finance lease under ASU 2016-02.
3. For each case, compute the lease liability to be shown on the balance sheet at the commencement date under ASU 2016-02.

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Case 1 Case 2 Case 3 Fair value of equipment Unguaranteed residual value Bargain purchase option Life of lease Economic life of asset Rate of return required $160,000 $95,000 $125,000 83,000 48,000 s 3,000 6 vears 13 years 10% years 9years 6years 9 vears 14 years16 years 5% 4%