33. On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,525 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. (a) Correct answer icon Your answer is correct. What is the nature of this lease to Skysong Company? This lease is a(n) select a type of lease . eTextbook and Media List of Accounts Attempts: 1 of 3 used (b) What is the present value of the minimum lease payments? (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Present Value of Minimum Lease Payments $enter the Present Value of Minimum Lease Payments in dollars
33. On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,525 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. (a) Correct answer icon Your answer is correct. What is the nature of this lease to Skysong Company? This lease is a(n) select a type of lease . eTextbook and Media List of Accounts Attempts: 1 of 3 used (b) What is the present value of the minimum lease payments? (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Present Value of Minimum Lease Payments $enter the Present Value of Minimum Lease Payments in dollars
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...
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Question
33.
On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms:
| 1. | Noncancelable term of 4 years. | |
| 2. | Rental of $8,525 per year (at beginning of each year). | |
| 3. | Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. | |
| 4. | Estimated economic life of the machine is 5 years. | |
| 5. | Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. |
(a)
Correct answer icon
Your answer is correct.
What is the nature of this lease to Skysong Company?
| This lease is a(n) select a type of lease . |
eTextbook and Media
List of Accounts
Attempts: 1 of 3 used
(b)
What is the present value of the minimum lease payments? (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)
| Present Value of Minimum Lease Payments | $enter the Present Value of Minimum Lease Payments in dollars |
eTextbook and Media
List of Accounts
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Attempts: 0 of 3 used
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(c)
The parts of this question must be completed in order. This part will be available when you complete the part above.(d)
The parts of this question must be completed in order. This part will be available when you complete the part above.(e)
The parts of this question must be completed in order. This part will be available when you complete the part above.Expert Solution
Step 1
Lease
It is an agreement between the two parties i.e. lessor and the lessee. In which the lessor has given the right to use to the lessee inconsideration of a certain payment that may be quarterly or monthly.
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