andhill Company, a machinery dealer, leased a machine to Wildhorse Corporation on January 1, 2025. The lease is for period and requires equal annual payments of $30,232 at the beginning of each year. The first payment is received on. Sandhill had purchased the machine during 2024 for $105,000. Collectibility of lease payments by Sandhill is probable che annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and Sandhill at the termination of the lease.

andhill Company, a machinery dealer, leased a machine to Wildhorse Corporation on January 1, 2025. The lease is for period and requires equal annual payments of $30,232 at the beginning of each year. The first payment is received on. Sandhill had purchased the machine during 2024 for $105,000. Collectibility of lease payments by Sandhill is probable che annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and Sandhill at the termination of the lease.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, 2020 Arab Company leases a machine from GMC Corp. with 8 years useful life. The lease term is six-year requires payment of $87,000 at the beginning of each year. The incremental borrowing rate for the lessee is 10%; the lessor's implicit rate is 8% and is known by the lessee. If the fair value of the machine is $520.000, and the machine will be reverting to GMC Corp at the end of lease term. The present value of an annuity due of 1 for six years at 10% is 4.79079. The present value of an annuity due of 1 for six years at 8% is 4.99271. The annual depreciation for the leased machine at Arab Corp. as lessee is closed to: a. $43,366. b. $48,661. c. $72,394. d. $54,295.
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