Reference no: EM132648392

On December 31, 20Y3, Lopez Company (lessee) signed a 3-year, noncancelable lease for the use of manufacturing equipment now owned by Zinger, Inc. (lessor). The lease expires December 31, 20Y6 and has the following terms: Annual contractual payments of $16,664 at the end of each year. The first payment is due December 31, 20Y3. No down payment; No purchase option. The asset's FMV at 12/31/Y3 is $60,000. Lopez does not guarantee any residual value at 12/31/Y6. Lopez can borrow at 10% per year for a 3-year loan; Lopez is unaware of Zinger's 8% desired return rate. The estimated useful life of the asset is 4 years.

REQUIRED

Question 1: Use the following templates to show how the above lease transaction impacted Lopez's Statement of Cash Flows, Income Statement, and Balance Sheet for the years 20Y3-20Y6. Round all amounts to the nearest whole dollar. The Balance Sheet should reflect cumulative changes to the statement. These amounts will not necessarily equal the December 31, 20YX ending balances in the Balance Sheet accounts. It should also separate debt into current and a non-current amounts. Some lines might not have answers. List account names or transaction descriptions in the first column and amounts in the remaining columns. NOTE: The t-accounts are not required, but it is strongly suggested that you work the problems using t- accounts first and then transfer your answers to the appropriate financial statements.