Kingbird Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for aperiod of 10 years. The normal selling price of the equipment is $304,659, and its unguaranteed residual value at the end of the leaseterm is estimated to be $19.400. National will pay annual payments of $40,800 at the beginning of each year. Kingbird incurred costsof $164,100 in manufacturing the equipment and $3,900 in sales commissions in closing the lease. Kingbird has determined that thecollectibility of the lease payments is probable and that the implicit interest rate is 8%.Click here to view factor tables.(a)Discuss the nature of this lease in relation to the lessor.This is asales-type leaseCompute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and thefinal answers to O decimal places, eg. 5.275)(1)Lease receivableS(2)Sales priceS(3)Cost of sales$

Manufacturer Lessor:Manufacturers or dealers frequently provide customers with the option of either…

Answered: Compute the amount of each of the…

Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places, eg 5.275)

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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Question

Kingbird Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a
period of 10 years. The normal selling price of the equipment is $304,659, and its unguaranteed residual value at the end of the lease
term is estimated to be $19.400. National will pay annual payments of $40,800 at the beginning of each year. Kingbird incurred costs
of $164,100 in manufacturing the equipment and $3,900 in sales commissions in closing the lease. Kingbird has determined that the
collectibility of the lease payments is probable and that the implicit interest rate is 8%.
Click here to view factor tables.
(a)
Discuss the nature of this lease in relation to the lessor.
This is a
sales-type lease
Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the
final answers to O decimal places, eg. 5.275)
(1)
Lease receivable
S
(2)
Sales price
S
(3)
Cost of sales
$

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