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

Commencement date ..................................................... October 1, 2022
Lease term ....................................................................................... 6 years
Economic life of leased equipment .............................................. 6 years
Fair value of asset at October 1, 2022 ....................................... £313,043
Book value of asset at October 1, 2022 .................................... £280,000
Residual value at end of lease term .................................................... –0–
Lessor’s implicit rate .............................................................................. 8%
Lessee’s incremental borrowing rate .................................................. 8%
Annual lease payment due at the beginning of each year, beginning
with October 1, 2022 ..................................................................... £62,700

The collectibility of the lease payments is probable by the lessor. 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 sales-type lease.

Instructions

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, 2023?

2. What items and amounts will appear on the lessee’s statement of financial position at September 30, 2023?

3. What items and amounts will appear on the lessee’s income statement for the year ending September 30, 2024?

4. What items and amounts will appear on the lessee’s statement of financial position at September 30, 2024?

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, 2022?

2. What items and amounts will appear on the lessee’s statement of financial position at December 31, 2022?

3. What items and amounts will appear on the lessee’s income statementfor the year ending December 31, 2023?

4. What items and amounts will appear on the lessee’s statement offinancial position at December 31, 2023? 

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Interest (8%) on Unpaid Lease Reduction Balance of Payment/ Receipt Liability/Receivable Liability/Receivable Liability/Receivable of Lease Lease Date 10/01/22 £313,043 10/01/22 £62,700 £ 62,700 250,343 10/01/23 62,700 £20,027 42,673 207,670 10/01/24 62,700 16,614 46,086 161,584 10/01/25 62,700 12,927 49,773 111,811 10/01/26 62,700 8,945 53,755 58,056 10/01/27 62,700 4,644 58,056 -0- £376,200 £63,157 £313,043