ent Attempt in Progress ura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Tamarisk Company. The following informati lates to this agreement. = The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2020, is $78,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value o
ent Attempt in Progress ura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Tamarisk Company. The following informati lates to this agreement. = The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2020, is $78,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value o
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Current Attempt in Progress
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Tamarisk Company. The following information
relates to this agreement.
1.
2.
3.
4.
5.
6.
The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5
years.
The fair value of the asset at January 1, 2020, is $78,000.
The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of
$7,000, none of which is guaranteed.
The agreement requires equal annual rental payments of $24,869.98 to the lessor, beginning on January 1, 2020.
The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee.
Tamarisk uses the straight-line depreciation method for all equipment.
Transcribed Image Text:Date
Account Titles and Explanation
(To record the lease)
(To record lease liability)
Debit
Credit
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