Baxter Company leased equipment to Fritz Inc. on January 1, 2002. The lease is for an eight-year period expiring December 31, 2009.

Baxter Company leased equipment to Fritz Inc. on January 1, 2002. The lease is for an eight-year period expiring December 31, 2009. The first of eight equal annual payments of $900,000 was made on January 1, 2002. Baxter had purchased the equipment on December 29, 2001 for $4,800,000. The lease is appropriately accounted for as a sales-type lease by Baxter. Assume that the present value at January 1, 2002, of all rent payments over the lease term discounted at a 10 percent interest rate was $5,280,000. What amount of interest revenue should Baxter record in 2003 (the second year of the lease period) as a result of the lease?a. 490,000b. 480,000c. 438,000d. 391,0002. Stockton, Inc. leased machinery with a fair value of $250,000 from Layton Machine Co. on December 31, 2001. The contract is a six-year noncancellable lease with an implicit interest rate of 10 percent. The lease requires annual payments of $50,000 beginning December 31, 2001. Stockton appropriately accounted for the lease as a capital lease. Stockton’s incremental borrowing rate is 12 percent. Assuming the present value of an annuity due of 1 for 6 years at 10 percent is 4.7908 and the present value of an annuity due of 1 for 6 years at 12 percent is 4.6048, what is the lease liability that Stockton should report on the balance sheet at December 31, 2001?A. $189,540B. $200,000C. $230,240D. $239,5403. On December 1, 2002, Blake Inc. signed an operating lease for a warehouse for 10 years at $24,000 per year. Upon execution of the lease, Blake paid $48,000 covering rent for the first two years. How much should be shown in Blake’s income statement for the year ended December 31, 2002, as rent expense?A. $0B. $2,000C. $24,000D. $48,0004Slice Company manufactures equipment that they sell or lease. On December 31, 2002, Slice leased equipment to Hook Company for a five-year period after which the ownership of the leased asset will be transferred to Hook. The lease calls for equal annual payments of $50,000, due on December 31 of each year. The first payment was made on December 31, 2001. The normal sales price of the equipment is $220,000, and cost is $176,000. For the year ended December 31, 2002, what amount of income should Slice report from the lease transaction?A. $10,000B. $30,000C. $44,000D. $74,000