e lease terms, provisions, and related events are as follows: • The lease is noncancelable and has a term of 8 years. • The annual rentals are $32,000, payable at the end of each year. • Tilson agrees to pay all executory costs. • The interest rate implicit in the lease is
e lease terms, provisions, and related events are as follows: • The lease is noncancelable and has a term of 8 years. • The annual rentals are $32,000, payable at the end of each year. • Tilson agrees to pay all executory costs. • The interest rate implicit in the lease is
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 4P: Lessee Accounting Issues Timmer Company signs a lease agreement dated January 1, 2019, that provides...
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Lamplighter Company, the lessor, agrees to lease equipment to Tilson Company, the lessee, beginning January 1, 2016. The lease terms, provisions, and related events are as follows:
• | The lease is noncancelable and has a term of 8 years. |
• | The annual rentals are $32,000, payable at the end of each year. |
• | Tilson agrees to pay all executory costs. |
• | The interest rate implicit in the lease is 14%. |
• | The cost of the equipment to the lessor is $110,000. |
• | The lessor incurs no material initial direct costs. |
• | The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. |
• | The lessor estimates that the fair value at the end of the lease term will be $20,000 and that the economic life of the equipment is 9 years. |
Required:
1. | Calculate the selling price implied by the lease and prepare a table summarizing the lease receipts and interest revenue earned by the lessor for this sales-type lease. |
2. | Next Level State why this is a sales-type lease. |
3. | Prepare |
4. | Prepare partial |
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