P$20.13($LD$2,4)$ Balance Sheet and Income Statement Disclosure$-$Lessee

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

Commencement date: October $1,2025.$ Lease term: $6$ years. Economic life of leased equipment: $6$ years. Fair value of asset at October $1,2025$: $$313,043.$ Book value of asset at October $1,2025$: $$280,000.$ Residual value at end of lease term: $$0.$ Lessor's implicit rate: $8\%.$ Lessee's incremental borrowing rate: $8\%.$ Annual lease payment due at the beginning of each year, beginning with October $1,2025$: $$62,700.$

The collectability 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

$10/01/25$ $$313,043$

$10/01/25$ $$62,700$ $$62,700250,343$

$10/01/2662,700$ $$20,02742,673207,670$

$10/01/2762,70016,61446,086161,584$

$10/01/2862,70012,92749,773111,811$

$10/01/2962,7008,94553,75558,056$

$10/01/3062,7004,64458,0560$

$$376,200$ $$63,157$ $$313,043$

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 $31,2025?$

$2$ What items and amounts will appear on the lessee's balance sheet at December $31,2025?$

$3$ What items and amounts will appear on the lessee's income statement for the year ending

December $31,2026?$

$4$ What items and amounts will appear on the lessee's balance sheet at December $31,2026?$