Blossom Manufacturing Ltd. has signed a lease agreement with Crane Leasing Inc. to lease some specialized manufacturing equipment. The terms of the lease are as follows: The lease is for 5 years commencing January 1, 2023. Blossom must pay Crane $54,114 on January 1 of each year, beginning in 2023. Equipment of this type normally has an economic life of 6 years. Crane has concluded, based on its review of Blossom's financial statements, that there is no unusual credit risk in this situation. Crane will not incur any further costs with regard to this lease. Crane purchases this equipment directly from the manufacturer at a cost of $214,026, and normally sells the equipment for $251.626. Blossom's borrowing rate is 7%. Crane's implied interest rate is 6%, which is known to Blossom at the time of negotiating the lease. Blossom uses the straight-line method to depreciate similar equipment. Both Blossom and Crane have calendar fiscal years (year end December 31), and follow ASPE. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. (a) (c) Prepare a lease amortization schedule for this lease. (Round answers to O decimal places, e.g. 5,275.)
Blossom Manufacturing Ltd. has signed a lease agreement with Crane Leasing Inc. to lease some specialized manufacturing equipment. The terms of the lease are as follows: The lease is for 5 years commencing January 1, 2023. Blossom must pay Crane $54,114 on January 1 of each year, beginning in 2023. Equipment of this type normally has an economic life of 6 years. Crane has concluded, based on its review of Blossom's financial statements, that there is no unusual credit risk in this situation. Crane will not incur any further costs with regard to this lease. Crane purchases this equipment directly from the manufacturer at a cost of $214,026, and normally sells the equipment for $251.626. Blossom's borrowing rate is 7%. Crane's implied interest rate is 6%, which is known to Blossom at the time of negotiating the lease. Blossom uses the straight-line method to depreciate similar equipment. Both Blossom and Crane have calendar fiscal years (year end December 31), and follow ASPE. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. (a) (c) Prepare a lease amortization schedule for this lease. (Round answers to O decimal places, e.g. 5,275.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Blossom Manufacturing Ltd. has signed a lease agreement with Crane Leasing Inc. to lease some specialized manufacturing
equipment. The terms of the lease are as follows:
.
The lease is for 5 years commencing January 1, 2023.
Blossom must pay Crane $54,114 on January 1 of each year, beginning in 2023.
Equipment of this type normally has an economic life of 6 years.
Crane has concluded, based on its review of Blossom's financial statements, that there is no unusual credit risk in this
situation. Crane will not incur any further costs with regard to this lease.
Crane purchases this equipment directly from the manufacturer at a cost of $214,026, and normally sells the equipment for
$251,626.
Blossom's borrowing rate is 7%. Crane's implied interest rate is 6%, which is known to Blossomat the time of negotiating the
lease.
Blossom uses the straight-line method to depreciate similar equipment.
Both Blossom and Crane have calendar fiscal years (year end December 31), and follow ASPE.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.
(a)
(c)
Prepare a lease amortization schedule for this lease. (Round answers to O decimal places, e.g. 5.275.)
Date
January 1, 2023
January 1, 2023
$
January 1, 2024
January 1, 2025
January 1, 2026
January 1, 2027
Payment
GA
Interest
$
$
$
$
Principal
$
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