Answer:
a) <em>What is the effective annual interest rate?</em>
Effective annual interest rate = 6,911/69,108
Effective annual interest rate = 0.100003
Effective annual interest rate = 10.00%
b) <em>What would the lessee record as annual amortization on the right-of-use asset using the straight-line method?</em>
Annual amortization on the right-of-use asset = Right of use asset / Lease term
= $81,108/10
= $8,110.8
c) <em>What is the outstanding balance after payment 9?</em>
Outstanding balance after 8th payment = $20,826
Effective interest = $20,826*10%
Effective interest = $2,082.60
Cash payment = $12,000
Decrease in balance = $12,000 - $2,082.60
Decrease in balance = $9,917.4
Outstanding balance after payment 9 = Outstanding balance after 8th payment - Decrease in balance
Outstanding balance after payment 9 = $20,826 - $9,917.4
Outstanding balance after payment 9 = $10,908.60
