On June 30, 2018, Blue, Inc. leased a machine from Big LeasingCorporation. The lease agreement qualifies as a capital lease andcalls for Blue to make semiannual lease payments of $286,143 over athree-year lease term, payable each June 30 and December 31, withthe first payment at June 30, 2018. Blue’s incremental borrowingrate is 8%, the same rate Big uses to calculate lease paymentamounts. The lease agreement qualifies as a finance lease.Amortization is recorded on a straight-line basis at the end ofeach year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1and PVAD of $1) (Use appropriate factor(s) from the tablesprovided.) Required: 1. Determine the present value of the leasepayments at June 30, 2018, (to the nearest $000) that Blue uses torecord the right-of-use asset and lease liability. 2. What would bethe amounts related to the lease that Blue would report in itsbalance sheet at December 31, 2018? (Ignore taxes.) 3. What wouldbe the amounts related to the lease that Blue would report in itsincome statement for the year ended December 31, 2018? (Ignoretaxes.) (For all requirements, round your answers to the nearestwhole dollar amounts.)
