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Bunker Company negotiated a lease with Gilbreth Company that begins on January 1, 2017 The lease term is three years, and the asset's economic life is four years. The annual lease payments are $7,500, payable at the end of the year. The cost and fair value of the asset are $23,000. The lessee's cost of borrowing is 9%. Bunker accounts for leases under ASC 840. Required: 1. Determine whether Bunker must treat this lease as an operating lease or a capital lease. 2. Prepare an amortization table for the lease. 3. Prepare Bunker's journal entries for the first two years of the lease. 4. Assume that all facts remain the same except that the asset's useful life is six years. Is this an operating lease or a capital lease?Prepareournal entries for the first two years of the lease. 5. Compare the financial statement effects of the lease treatment you selected in require- ment 3 with the financial statement effects of the treatment you selected in requirement 4. Specifically, compare the effects on assets, liabilities, and equity under the two alterna- tive sets of assumptions as of December 31, 2017, immediately after the first lease pay- ment is made. Bunker Company negotiated a lease with Gilbreth Company that begins on January 1, 2017 The lease term is three years, and the asset's economic life is four years. The annual lease payments are $7,500, payable at the end of the year. The cost and fair value of the asset are $23,000. The lessee's cost of borrowing is 9%. Bunker accounts for leases under ASC 840. Required: 1. Determine whether Bunker must treat this lease as an operating lease or a capital lease. 2. Prepare an amortization table for the lease. 3. Prepare Bunker's journal entries for the first two years of the lease. 4. Assume that all facts remain the same except that the asset's useful life is six years. Is this an operating lease or a capital lease?Prepareournal entries for the first two years of the lease. 5. Compare the financial statement effects of the lease treatment you selected in require- ment 3 with the financial statement effects of the treatment you selected in requirement 4. Specifically, compare the effects on assets, liabilities, and equity under the two alterna- tive sets of assumptions as of December 31, 2017, immediately after the first lease pay- ment is made

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