Blossom Inc., which uses IFRS, manufactures an X-ray machine with an estimated life of 12 years and leases it to SNC Medical Centre for a period of 10 years. The machine's normal selling price is $343,349, and the lessee guarantees a residual value at the end of the lease term of $14,000. The medical centre will pay rent of $50,000 at the beginning of each year and all maintenance, insurance, and taxes. Blossom incurred costs of $205,000 in manufacturing the machine and $13,000 in negotiating and closing the lease. Blossom has determined that the collectibility of the lease payments is reasonably predictable, that there will be no additional costs incurred, and that its implicit interest rate is 10%. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. b. (b) Describe the nature of the lease. The lease is to Blossom. Calculate the amount of each of the following items: (Round answers to O decimal places, e.g. 5,275.) 1. Gross investment 2. Sale price $ $ 3. Unearned interest income $ 4. Cost of goods sold C. Prepare a 10-year lease amortization schedule for the lease obligation.
Blossom Inc., which uses IFRS, manufactures an X-ray machine with an estimated life of 12 years and leases it to SNC Medical Centre for a period of 10 years. The machine's normal selling price is $343,349, and the lessee guarantees a residual value at the end of the lease term of $14,000. The medical centre will pay rent of $50,000 at the beginning of each year and all maintenance, insurance, and taxes. Blossom incurred costs of $205,000 in manufacturing the machine and $13,000 in negotiating and closing the lease. Blossom has determined that the collectibility of the lease payments is reasonably predictable, that there will be no additional costs incurred, and that its implicit interest rate is 10%. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. b. (b) Describe the nature of the lease. The lease is to Blossom. Calculate the amount of each of the following items: (Round answers to O decimal places, e.g. 5,275.) 1. Gross investment 2. Sale price $ $ 3. Unearned interest income $ 4. Cost of goods sold C. Prepare a 10-year lease amortization schedule for the lease obligation.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Blossom Inc., which uses IFRS, manufactures an X-ray machine with an estimated life of 12 years and leases it to SNC Medical Centre
for a period of 10 years. The machine's normal selling price is $343,349, and the lessee guarantees a residual value at the end of the
lease term of $14,000. The medical centre will pay rent of $50,000 at the beginning of each year and all maintenance, insurance, and
taxes. Blossom incurred costs of $205,000 in manufacturing the machine and $13,000 in negotiating and closing the lease. Blossom
has determined that the collectibility of the lease payments is reasonably predictable, that there will be no additional costs incurred,
and that its implicit interest rate is 10%.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.
b.
(b)
Describe the nature of the lease.
The lease is
to Blossom.
Calculate the amount of each of the following items: (Round answers to O decimal places, e.g. 5,275.)
1.
Gross investment
2.
Sale price
$
$
3.
Unearned interest income
$
4.
Cost of goods sold
C. Prepare a 10-year lease amortization schedule for the lease obligation.
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