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

Commencement date

October $1,2020$

Lease term

$6$ years

Economic life of leased equipment

$6$ years

Fair value of asset at October $1,2020$

$$313,043$

Book value of asset at October $1,2020$

$$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 $1,2020$

$$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 finance lease by the lessee and as a sales$-$type lease by the lessor.

Date

Lease

Payment$/$

Receipt

Interest $(8\%)$

on Unpaid Liability$/$

Receivable

Reduction

of Lease

Liability$/$Receivable

Balance of

Lease

Liability$/$Receivable

$10/01/20$

$$313,043$

$10/01/20$

$$162,700$

$$162,700$

$1250,343$

$10/01/21$

$$162,700$

$$20,027$

$1142,673$

$1207,670$

$10/01/22$

$$162,700$

$116,614$

$1146,086$

$1161,584$

$10/01/23$

$$162,700$

$112,927$

$1149,773$

$1111,811$

$10/01/24$

$$162,700$

$118,945$

$1153,755$

$1158,056$

$10/01/25$

$$162,700$

$114,644$

$1158,056$

$10$

$$376,200$

$$63,157$

$$313,043$

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 $30,2021?$

$2.$ What items and amounts will appear on the lessee's balance sheet at September $30,2021?$

$3.$ What items and amounts will appear on the lessee's income statement for the year ending September $30,2022?$

$4.$ What items and amounts will appear on the lessee's balance sheet at September $30,2022?$

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 $31,2020?$

$2.$ What items and amounts will appear on the lessee's balance sheet at December $31,2020?$

$3.$ What items and amounts will appear on the lessee's income statement for the year ending December $31,2021?$

$4.$ What items and amounts will appear on the lessee's balance sheet at December $31,2021?$