Chapter 21 Self Study Solutions

CHAPTER21
Accountingfor Leases
BRIEFEXERCISE21-1
Theleasedoesnot meetthe transferof ownershiptest, thebargainpurchasetest, or the economic
life test [(5 years 8 years) < 75%]. However, it does pass the recoveryof investmenttest. The
present value of the minimumlease payments ($31,000 X 4.16986 = $129,266) is greater than
90% of the FMV of the asset (90% X $138,000 = $124,200). Therefore, Callawayshould classify
the leaseas a capital lease.
BRIEFEXERCISE21-2
LeasedEquipmentUnderCapital Leases..................................
LeaseLiability...............................................................
150,000
LeaseLiability.......................................................................
Cash............................................................................
43,019
150,000
43,019
BRIEFEXERCISE21-3
InterestExpense....................................................................
InterestPayable[($300,000 $53,920)X 12%]....................
29,530
DepreciationExpense............................................................
AccumulatedDepreciation($300,000X 1/8).......................
37,500
29,530
37,500
BRIEFEXERCISE21-4
InterestPayable[($300,000 $53,920)X 12%]............................
LeaseLiability.......................................................................
Cash............................................................................
29,530
24,390
53,920
BRIEFEXERCISE21-5
RentExpense........................................................................
Cash............................................................................
35,000
35,000
Copyright 2010 John Wiley & Sons, Inc.Kieso, Intermediate Accounting, 13/e, Solutions Manual(For Instructor Use Only)
21-1
BRIEFEXERCISE21-6
LeaseReceivable(4.99271X $30,044).......................................
Equipment....................................................................
150,000
Cash....................................................................................
LeaseReceivable...........................................................
30,044
150,000
30,044
BRIEFEXERCISE21-7
InterestReceivable................................................................
InterestRevenue[($150,000 $30,044)X 8%]....................
9,596
9,596
BRIEFEXERCISE21-8
Cash........................................................................... 15,000
RentRevenue................................................................
AccumulatedDepreciation($80,000X 1/8).........................
15,000
10,000
10,000
BRIEFEXERCISE21-9
LeasedMachineryUnderCapitalLeases..................................
LeaseLiability...............................................................
*PV of rentals
[PV of guar. RV
$40,000X 4.79079
$20,000X .56447
202,921*
202,921
$191,632
11,289
$202,921
LeaseLiability.......................................................................
Cash............................................................................
40,000
40,000
BRIEFEXERCISE21-10
LeaseReceivable...................................................................
Machinery.....................................................................
Cash........................................................................... 40,000
21-2
202,921
202,921
40,000
BRIEFEXERCISE21-11
LeaseReceivable($40,800X 4.03735).......................................
Sales............................................................................
164,724
Cost of GoodsSold................................................................
Inventory......................................................................
110,000
164,724
110,000
Cash........................................................................... 40,800
40,800
*BRIEFEXERCISE21-12
Cash........................................................................... 33,000
Truck............................................................................
UnearnedProfit on Sale-Leaseback..................................
LeasedTruckUnderCapitalLeases.........................................
LeaseLiability...............................................................
28,000
5,000
33,000*
33,000
*($8,705X 3.79079;$1 differencedue to rounding.)

AccumulatedDepreciation($33,000X 1/5).........................
6,600
UnearnedProfit on Sale-Leaseback.........................................
DepreciationExpense($5,000X 1/5).................................
1,000
InterestExpense($33,000X 10%)............................................
LeaseLiability.......................................................................
Cash............................................................................
3,300
5,405
6,600
1,000
8,705
21-3
SOLUTIONSTO EXERCISES
EXERCISE21-1 (1520minutes)
(a)
This is a capital lease to Adamssince the lease term (5 years) is greater than 75% of the
economiclife (6 years) of the leased asset. The lease term is 831/3% (5 6) of the assets
economiclife.
(b) Computationof presentvalueof minimumleasepayments:

$9,968X 4.16986*= $41,565
*Presentvalueof an annuitydueof 1 for 5 periodsat 10%.
(c)
1/1/10
12/31/10
1/1/11
21-4
LeasedMachineUnderCapital
Leases......................................................
LeaseLiability.......................................
41,565
41,565
LeaseLiability...............................................
Cash....................................................
9,968
DepreciationExpense....................................
AccumulatedDepreciation
Capital Leases...................................
($41,565 5 = $8,313)
8,313
InterestExpense...........................................
InterestPayable.....................................
[($41,565 $9,968)X .10]
3,160
LeaseLiability...............................................
InterestPayable............................................
Cash....................................................
6,808
3,160
9,968
8,313
3,160
9,968
(a)
To Brecker, the lessee, this lease is a capital lease because the terms satisfy the
followingcriteria:
1.
2.
The lease termis greater than 75%of the economiclife of the leasedasset; that is, the
leasetermis 831/3 % (50/60)of theeconomiclife.
The present value of the minimum lease payments is greater than 90% of the fair
value of the leased asset; that is, the present value of $10,515 (see below) is 96% of
the fair valueof the leasedasset:
(b) The minimumlease payments in the case of a guaranteed residual value by the lessee
includethe guaranteedresidualvalue. The presentvaluethereforeis:
Monthlypaymentof $250for 50 months........................
$ 9,800
Residualvalueof $1,180.............................................
715
Presentvalueof minimumleasepayments....................
$10,515
(c)
LeasedPropertyUnderCapital Leases.................................
LeaseLiability............................................................
10,515
(d) DepreciationExpense........................................................
AccumulatedDepreciationCapital
Leases...................................................................
[($10,515 $1,180) 50 months= $186.70]
186.70
(e)
144.85
105.15
LeaseLiability...................................................................
InterestExpense(1%X $10,515)..........................................
Cash.........................................................................
10,515
186.70
250.00
Capitalizedamountof the lease:
Yearlypayment................................................................
Executorycosts...............................................................
Minimumannualleasepayment.........................................
$90,000.00
(3,088.14)
$86,911.86
21-5
Presentvalueof minimumleasepayments
$86,911.86X 6.32825= $550,000.00
1/1/11
LeasedBuildingUnderCapital
Leases................................................
LeaseLiability.................................
1/1/11
12/31/11
12/31/11
1/1/12
12/31/12
12/31/12
21-6
550,000.00
550,000.00
ExecutoryCostsPropertyTaxes................
LeaseLiability.........................................
Cash..............................................
3,088.14
86,911.86
DepreciationExpense..............................
Capital Leases.............................
($550,000 10)
55,000.00
InterestExpense
(SeeSchedule1)..................................
InterestPayable...............................
90,000.00
55,000.00
55,570.58
55,570.58
ExecutoryCostsPropertyTaxes.................
InterestPayable......................................
LeaseLiability.........................................
Cash..............................................
3,088.14
55,570.58
31,341.28
Capital Leases.............................
55,000.00
InterestExpense.....................................
InterestPayable...............................
51,809.62
90,000.00
55,000.00
51,809.62
Schedule1
KIMBERLY-CLARKCORP.
LeaseAmortizationSchedule
(Lessee)
AnnualPayment
LessExecutory
Costs
Date
1/1/11
1/1/11
1/1/12
1/1/13
Interest(12%)on
Liability
$86,911.86
86,911.86
86,911.86
$
0
55,570.58
51,809.62
Reduction of
LeaseLiability
LeaseLiability
$86,911.86
31,341.28
35,102.24
$550,000.00
463,088.14
431,746.86
396,644.62
Computationof annualpayments
Cost (fair marketvalue)of leasedassetto lessor....................................
Less: Presentvalueof salvagevalue
(residualvaluein this case)
$16,000X .82645
(Presentvalueof 1 at 10%for 2 periods).....................................
Amountto be recoveredthroughleasepayments...................................
Twoperiodicleasepayments$226,776.80 1.73554*...............................
$240,000.00
13,223.20
$226,776.80
$130,666.42
*Presentvalueof an ordinaryannuityof 1 for 2 periodsat 10%

KRAUSSLEASINGCOMPANY(Lessor)
Date
1/1/11
12/31/11
12/31/12
AnnualPayment
LessExecutory
Costs
$130,666.42
130,666.42
Interest
on Recovery
of
LeaseReceivable LeaseReceivable
*$24,000.00
* 13,332.84*
*$37,332.84
$106,666.42
117,333.58
Lease
Receivable
$240,000.00
133,333.58
16,000.00
*Differenceof $.52 dueto rounding.

21-7
(a)
1/1/11
12/31/11
12/31/12
(b) 12/31/12
LeaseReceivable.............................
Equipment..............................
240,000.00
Cash($130,666.42+ $7,000)..............
ExecutoryCosts
Payable...............................
LeaseReceivable.....................
InterestRevenue......................
137,666.42
240,000.00
7,000.00
106,666.42
24,000.00
Cash............................. 137,666.42
ExecutoryCosts
Payable...............................
7,000.00
117,333.58
13,332.84
Cash................................. 16,000.00
16,000.00
(a)
Because the lease term is longer than 75% of the economic life of the asset and the
present value of the minimumlease payments is more than 90% of the fair value of the
asset, it is a capital lease to the lessee. Assumingcollectibility of the rents is reasonably
assuredand no importantuncertaintiessurroundthe amountof unreimbursablecostsyet
to be incurredby the lessor,the leaseis a directfinancingleaseto the lessor.
The lessee should adopt the capital lease method and record the leased asset and lease
liability at the presentvalueof the minimumleasepaymentsusingthe lesseesincremental
borrowingrate or the interestrate implicit in the leaseif it is lowerthanthe incrementalrate
and is known to the lessee. The lessees depreciation depends on whether ownership
transfersto the lesseeor if there is a bargainpurchaseoption. If one of these conditionsis
fulfilled, amortizationwould be over the economiclife of the asset. Otherwise, it would be
depreciated over the lease term. Becauseboth the economiclife of the asset and the lease
termare threeyears,the leasedassetshouldbe depreciatedoverthis period.
21-8
The lessor should adopt the direct financinglease methodand replace the asset cost of
$75,000 with Lease Receivable of $75,000. (See schedule below.) Interest would be
recognizedannuallyat a constantrate relativeto the unrecoverednet investment.
Cost (fair marketvalueof leasedasset)..............................................
$75,000
Amountto be recoveredby lessorthroughlease

payments....................................................................................
$75,000
Threeannualleasepayments: $75,000 2.53130*...............................
$29,629
*Presentvalueof an ordinaryannuityof 1 for 3 periodsat 9%.

(b) Scheduleof Interestand Amortization
RentReceipt/
Payment
1/1/11
12/31/11
12/31/12
12/31/13
InterestRevenue/
Expense
$29,629
29,629
29,629
*$6,750*
4,691
2,446
Reductionof
Principal
Receivable/
Liability
$22,879
24,938
27,183
$75,000
52,121
27,183
0
*$75,000X .09 = $6,750

(a)
$38,514X 5.7122*= $220,000

*Presentvalueof an annuitydue of 1 for 8 periodsat 11%.
(b) 1/1/11
1/1/11
LeaseReceivable......................................
Cost of GoodsSold...................................
Sales...............................................
Inventory..........................................
220,000
170,000
Cash........................................................
LeaseReceivable..............................
38,514
220,000
170,000
38,514
21-9
12/31/07
InterestReceivable....................................
InterestRevenue
[($220,000 $38,514)X .11].............
19,963
19,963
(a)
This is a capital lease to Woodssince the leasetermis 75%(6 8) of the assets economic
life. In addition,the presentvalueof the minimumleasepaymentsis morethan90%of the
fair valueof the asset.
This is a capital lease to Palmer since collectibility of the lease payments is reasonably
predictable,thereare no importantuncertaintiessurroundingthe costs yet to be incurred by
the lessor, and the lease term is 75% of the assets economiclife. Becausethe fair value
of the equipment($200,000)exceedsthe lessorscost ($150,000),the leaseis a sales-type
lease.
(b) Computationof annualrental payment:

$200,000 ($10,000 X .53464)*
= $41,452
4.69590**
**Presentvalueof $1 at 11%for 6 periods.
**Presentvalueof an annuitydue at 11%for 6 periods.
(c)
1/1/11
LeasedEquipmentUnderCapital
Leases...................................................
LeaseLiability
($41,452X 4.60478)***.......................
LeaseLiability............................................
Cash.................................................
190,877
190,877
41,452
41,452
***Presentvalueof an annuitydueat 12%for 6 periods.

12/31/11
21-10
DepreciationExpense.................................
($190,877 6 years).........................
31,813
InterestExpense.........................................
InterestPayable
($190,877 $41,452)X .12.................
17,931
31,813
17,931
(d) 1/1/11
LeaseReceivable....................................
Cost of GoodsSold.................................
Sales.............................................
Inventory........................................
200,000*
144,654**
194,654***
150,000
*($41,452X 4.6959)+ ($10,000X .53464)

**$150,000 ($10,000X .53464)
***$41,452X 4.6959
Cash........................................... 41,452
12/31/11
InterestReceivable..................................
InterestRevenue
[($200,000 $41,452)X .11].............
41,452
17,440
17,440
(a)
The lease agreement has a bargain purchase option and thus meets the criteria to be
classifiedas a capital leasefromthe viewpointof the lessee.Also, the presentvalueof the
minimumleasepaymentsexceeds90%of the fair valueof the assets.
(b) The lease agreement has a bargain purchase option. The collectibility of the lease
paymentsis reasonablypredictable,and thereare no importantuncertaintiessurrounding
the costs yet to be incurred by the lessor. The lease, therefore, qualifies as a capital-type
lease from the view-point of the lessor. Due to the fact that the initial amount of lease
receivable (net investment) (which in this case equals the present value of the minimum
lease payments, $81,000) exceeds the lessors cost ($65,000), the lease is a sales-type
lease.
(c)
Computationof leaseliability:
$18,829.49
Annualrental payment
X 4.16986
PV of annuitydue of 1 for n = 5, i = 10%
$78,516.34PV of periodicrental payments
21-11
$ 4,000.00
X
.62092
$ 2,483.68
Bargainpurchaseoption
PV of 1 for n = 5, i = 10%
PV of bargainpurchaseoption
$78,516.34
PV of periodicrental payments
+ 2,483.68
$81,000.00*Leaseliability
*rounded
GILLCOMPANY(Lessee)
Date
5/1/10
5/1/10
5/1/11
5/1/12
5/1/13
5/1/14
4/30/15
AnnualLease
PaymentPlus
BPO
$18,829.49
18,829.49
18,829.49
18,829.49
18,829.49
4,000.00
$98,147.45
Interest
Reduction of
(10%)on Liability LeaseLiability
*$ 6,217.05
4,955.81
3,568.44
2,042.33
*
363.82*
$17,147.45
LeaseLiability
$18,829.49
12,612.44
13,873.68
15,261.05
16,787.16
3,636.18
$81,000.00
$81,000.00
62,170.51
49,558.07
35,684.39
20,423.34
3,636.18
0
*Roundingerror is 20 cents.
(d) 5/1/10
12/31/10
21-12
LeasedEquipmentUnder
Capital Leases.......................................
LeaseLiability..................................
81,000.00
81,000.00
LeaseLiability..........................................
Cash................................................
18,829.49
InterestExpense.......................................
InterestPayable
($6,217.05X 8/12= $4,144.70).............
4,144.70
18,829.49
4,144.70
1/1/11
5/1/11
12/31/11
12/31/11
DepreciationExpense.............................
Capital Leases............................
($81,000.00 10 =
($8,100.00;$8,100.00X
(8/12 = $5,400)
5,400
InterestExpense............................
4,144.70
InterestExpense....................................
LeaseLiability.......................................
Cash.............................................
6,217.05
12,612.44
InterestPayable.............................
($4,955.81X 8/12 =
($3,303.87)
3,303.87
Capital Leases............................
($81,000.00 10 years=
($8,100.00)
8,100.00
5,400
4,144.70
18,829.49
3,303.87
8,100.00
(Note to instructor: Becausea bargainpurchaseoptionwas involved,the leasedasset is

depreciatedover its economiclife ratherthanover the leaseterm.)
Note: The lease agreement has a bargain purchase option. The collectibility of the lease
paymentsis reasonably predictable, and there are no important uncertainties surroundingthe
costs yet to be incurredby the lessor. The lease, therefore, qualifies as a capital lease fromthe
viewpointof the lessor.
Due to the fact that the amount of the sale (which in this case equals the present value of the
minimumleasepayments,$81,000)exceedsthe lessorscost ($65,000), the leaseis a sales-type
lease.
21-13
The minimumlease paymentsassociatedwith this lease are the periodicannual rents plus the
bargain purchaseoption. There is no residual value relevant to the lessors accountingin this
lease.
(a)
Theleasereceivableis computedas follows:

$18,829.49
X 4.16986
$78,516.34
Annualrental payment
PV of annuitydue of 1 for n = 5, i = 10%
$ 4,000.00
X
.62092
$ 2,483.68
Bargainpurchaseoption
PV of 1 for n = 5, i = 10%
$78,516.34
+ 2,483.68
$81,000.00*Leasereceivableat inception
*Rounded
(b)
LENNOXLEASINGCOMPANY(Lessor)
Date
5/1/10
5/1/10
5/1/11
5/1/12
5/1/13
5/1/14
4/30/15
AnnualLease
PaymentPlus
BPO
$18,829.49
18,829.49
18,829.49
18,829.49
18,829.49
4,000.00
$98,147.45
Interest(10%)on Recovery of
LeaseReceivable LeaseReceivable
$ 6,217.05
4,955.81
3,568.44
2,042.33
363.82*
*$17,147.45
$18,829.49
12,612.44
13,873.68
15,261.05
16,787.16
3,636.18
$81,000.00
Lease
Receivable
$81,000.00
62,170.51
49,558.07
35,684.39
20,423.34
3,636.18
0
21-14
(c)
5/1/10
Cost of GoodsSold..........................
Sales......................................
Inventory................................
81,000.00
65,000.00
81,000.00
65,000.00
Cash............................... 18,829.49
12/31/10
5/1/11
12/31/11
5/1/12
12/31/12
InterestReceivable..........................
($6,217.05X 8/12 =
$4,144.70)
18,829.49
4,144.70
4,144.70
Cash............................... 18,829.49
InterestReceivable..................
InterestRevenue.....................
($6,217.05 $4,144.70)
($4,955.81X 8/12 =
($3,303.87)
12,612.44
4,144.70
2,072.35
3,303.87
3,303.87
Cash................................. 18,829.49
InterestReceivable...................
($4,955.81 $3,303.87)
($3,568.44X 8/12 =
($2,378.96)
13,873.68
3,303.87
1,651.94
2,378.96
2,378.96
21-15
(a)
Fair marketvalueof leasedassetto lessor...................................

Less: Presentvalueof unguaranteed
residualvalue$61,071X .56447
(presentvalueof 1 at 10%for 6 periods)............................
Amountto be recoveredthroughleasepayments.........................
$343,000.00
Six periodicleasepayments$308,527.25 4.79079*......................
$ 64,400.00**
34,472.75
$308,527.25
*Presentvalueof annuitydueof 1 for 6 periodsat 10%.

**Roundedto the nearestdollar.
(b)
FIEVALLEASINGCOMPANY(Lessor)
AnnualLease
PaymentPlus
URV
Interest(10%)on
LeaseReceivable
Date
1/1/10
1/1/10
1/1/11
1/1/12
1/1/13
1/1/14
1/1/15
12/31/15
(c)
1/1/10
1/1/10
12/31/10
1/1/11
12/31/11
21-16
$ 64,400
64,400
64,400
64,400
64,400
64,400
61,071
$447,471
$ 27,860
24,206
20,187
15,765
10,902
5,551
$104,471
Recovery
of Lease
Receivable
Lease
Receivable
$343,000
278,600
242,060
201,866
157,653
109,018
55,520
0
$ 64,400
36,540
40,194
44,213
48,635
53,498
55,520
$343,000
LeaseReceivable........................................
Equipment.........................................
343,000
343,000
Cash.............................................. 64,400
LeaseReceivable................................
InterestReceivable.....................................
InterestRevenue.................................
64,400
27,860
27,860
Cash.............................................. 64,400
LeaseReceivable................................
InterestReceivable.............................
InterestReceivable.....................................
InterestRevenue.................................
36,540
27,860
24,206
24,206
Note: This lease is a capital lease to the lessee because the lease term
(five years) exceeds75%of the remainingeconomiclife of the asset (five years). Also, the present
valueof the minimumleasepaymentsexceeds90%of the fair valueof the asset.
$20,541.11Annualrental payment
X 4.16986
PV of an annuitydue of 1 for n = 5, i = 10%
$85,653.55PV of minimumleasepayments
(a)
AZURECOMPANY(Lessee)
Date
1/1/10
1/1/10
1/1/11
1/1/12
1/1/13
1/1/14
AnnualLease
Payment
$ 20,541.11
20,541.11
20,541.11
20,541.11
20,541.11
$102,705.55
Interest(10%)on
Liability
Reduction of
LeaseLiability
*$ 6,511.24
5,108.26
3,564.97
* 1,867.53*
*$17,052.00
LeaseLiability
$20,541.11
14,029.87
15,432.85
16,976.14
18,673.58
$85,653.55
$85,653.55
65,112.44
51,082.57
35,649.72
18,673.58
0
(b) 1/1/10
1/1/10
LeasedEquipmentUnder
Capital Leases................................
LeaseLiability............................
LeaseLiability...................................
Cash.........................................
85,653.55
85,653.55
20,541.11
20,541.11
During2010
InsuranceExpense.............................
Cash.........................................
900.00
PropertyTax Expense.........................
Cash.........................................
1,600.00
900.00
1,600.00
21-17
12/31/10
1/1/11
6,511.24
Capital Leases............................
($85,653.55 5 = $17,130.71)
17,130.71
InterestExpense............................
6,511.24
LeaseLiability........................................
Cash.............................................
6,511.24
14,029.87
6,511.24
17,130.71
6,511.24
20,541.11
During2011
12/31/11
InsuranceExpense.................................
Cash.............................................
900.00
PropertyTax Expense.............................
Cash.............................................
1,600.00
5,108.26
Capital Leases............................
17,130.71
900.00
1,600.00
5,108.26
17,130.71
Noteto instructor:
1. Thelessorsetsthe annualrental paymentas follows:
Fair marketvalueof leasedassetto lessor..................................
Less: Presentvalueof unguaranteed
residualvalue$7,000X .62092
(presentvalueof 1 at 10%for 5 periods)...........................
Amountto be recoveredthroughleasepayments.........................
Five periodicleasepayments
$85,653.56 4.16986*............................................................
$90,000.00
4,346.44
$85,653.56
$20,541.11
*Presentvalueof annuitydueof 1 for 5 periodsat 10%.
21-18
2.
Theunguaranteedresidualvalueis notsubtractedwhendepreciatingthe leasedasset.
(a)
Entriesfor Secadaare as follows:

1/1/11
12/31/11
Building.................................................
Cash..................................................
3,600,000
3,600,000
Cash........................................ 220,000
RentalRevenue...............................
220,000
Building($3,600,000 50)..............
72,000
PropertyTax Expense..............................
InsuranceExpense..................................
Cash..............................................
85,000
10,000
72,000
95,000
(b) Entriesfor Rykerare as follows:

12/31/11
(c)
RentExpense.........................................
Cash..............................................
220,000
220,000
The real estate brokers fee should be capitalized and amortized equally over the 10-year
period.Asa result,realestatefeeexpenseof $3,000($30,000 10) shouldbe reportedin each
period.
(a)
Annualrental revenue.................................................................
Less: Maintenanceandotherexecutorycosts...............................
Depreciation($900,000 8)...............................................
Incomebeforeincometax............................................................
$180,000
25,000
112,500
$ 42,500
21-19
(b) Rentexpense.............................................................................
$180,000
Note: Both the rent security deposit and the last monthsrent prepaymentshould be reported
as a noncurrentasset.
21-20

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CHAPTER21

*($8,705X 3.79079;$1 differencedue to rounding.)

(b) Computationof presentvalueof minimumleasepayments:

*Presentvalueof an ordinaryannuityof 1 for 2 periodsat 10%

*Differenceof $.52 dueto rounding.

Amountto be recoveredby lessorthroughlease

Threeannualleasepayments: $75,000 2.53130*...............................

*Presentvalueof an ordinaryannuityof 1 for 3 periodsat 9%.

*$75,000X .09 = $6,750

$38,514X 5.7122*= $220,000

(b) Computationof annualrental payment:

***Presentvalueof an annuitydueat 12%for 6 periods.

*($41,452X 4.6959)+ ($10,000X .53464)

(Note to instructor: Becausea bargainpurchaseoptionwas involved,the leasedasset is

Theleasereceivableis computedas follows:

Fair marketvalueof leasedassetto lessor...................................

Six periodicleasepayments$308,527.25 4.79079*......................

*Presentvalueof annuitydueof 1 for 6 periodsat 10%.

*Presentvalueof annuitydueof 1 for 5 periodsat 10%.

Theunguaranteedresidualvalueis notsubtractedwhendepreciatingthe leasedasset.

Entriesfor Secadaare as follows:

(b) Entriesfor Rykerare as follows:

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