Current Attempt in Progress Ayayai Leasing Company agrees to lease equipment to Pina Corporation on January 1, 2025. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $541,000, and the fair value of the asset on January 1, 2025, is $760,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $45,000. Pina estimates that the expected residual value at the end of the lease term will be $45,000. Pina amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. 4. 5. The collectibility of the lease payments is probable. 6. Ayayai desires a 10% rate of return on its investments. Pina's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. (a) (b) Your answer is incorrect. Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Annual rental payment $ =SUPPORT
Current Attempt in Progress Ayayai Leasing Company agrees to lease equipment to Pina Corporation on January 1, 2025. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $541,000, and the fair value of the asset on January 1, 2025, is $760,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $45,000. Pina estimates that the expected residual value at the end of the lease term will be $45,000. Pina amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. 4. 5. The collectibility of the lease payments is probable. 6. Ayayai desires a 10% rate of return on its investments. Pina's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. (a) (b) Your answer is incorrect. Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Annual rental payment $ =SUPPORT
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 2E: Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement...
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Question
hrd.3
Transcribed Image Text:Current Attempt in Progress
Ayayai Leasing Company agrees to lease equipment to Pina Corporation on January 1, 2025. The following information relates to the lease agreement.
1.
The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.
2.
The cost of the machinery is $541,000, and the fair value of the asset on January 1, 2025, is $760,000.
3.
At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $45,000. Pina estimates that the expected residual value at the end of the lease term will be $45,000. Pina amortizes all of its leased equipment on a straight-line basis.
The lease agreement requires equal annual rental payments, beginning on January 1, 2025.
4.
5.
The collectibility of the lease payments is probable.
6.
Ayayai desires a 10% rate of return on its investments. Pina's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown.
(Assume the accounting period ends on December 31.)
Click here to view factor tables.
(a)
(b)
Your answer is incorrect.
Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.)
Annual rental payment
$
=SUPPORT
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