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Analyzing, Interpreting, and Capitalizing Operating Leases On January 1,2020, Alexander Mack Adventures Inc. entered...

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Accounting

Analyzing, Interpreting, and Capitalizing Operating Leases
On January 1,2020, Alexander Mack Adventures Inc. entered into land leases that grant unrestricted access to
property in Texas where the company plans to build an RV resort. Lease details follow.
Lease term: 15 years.
Upfront fees: $450,000 paid in cash.
Annual lease payment: $410,000 due at each year-end.
Lessee responsible for property tax and insurance.
The company also leased computer equipment with the following details.
Lease term: 4 years.
Upfront fees: $5,000.
Annual lease payments: $20,249.
Lessee has option to purchase equipment for $1 at end of lease.
Required
Note: For the following questions, round your answers to the nearest whole dollar; use rounded amounts for
further calculations.
a. Given the lease contract facts, determine the classification for each of the two leases (operating or finance).
Land lease:
Computer equipment lease:
b. Determine the amount of the lease liability that Alexander Mack will add to its balance sheet at the inception
of each lease. The company has a 9% cost of debt capital.
Land lease: $
Computer equipment lease: $
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