Goring Dairy leases its milking equipment from King Finance Company under the following lease terms. 1. 2. 3. 4. 5. 6. The lease term is 10 years, noncancelable, and requires equal rental payments of $30,300 due at the beginning of each year starting January 1, 2020. The equipment has a fair value at the commencement of the lease (January 1, 2020) of $242,741 and a cost of $180,000 on King Finance's books. It also has an estimated economic life of 15 years and an expected residual value of $45,000, though Goring Dairy has guaranteed a residual value of $50,000 to King Finance. The lease contains no renewal options, and the equipment reverts to King Finance upon termination of the lease. The equipment is not of a specialized use. Goring Dairy's incremental borrowing rate is 8% per year. The implicit rate is also 8%. Goring Dairy depreciates similar equipment that it owns on a straight-line basis. Collectibility of the payments is probable.
Goring Dairy leases its milking equipment from King Finance Company under the following lease terms. 1. 2. 3. 4. 5. 6. The lease term is 10 years, noncancelable, and requires equal rental payments of $30,300 due at the beginning of each year starting January 1, 2020. The equipment has a fair value at the commencement of the lease (January 1, 2020) of $242,741 and a cost of $180,000 on King Finance's books. It also has an estimated economic life of 15 years and an expected residual value of $45,000, though Goring Dairy has guaranteed a residual value of $50,000 to King Finance. The lease contains no renewal options, and the equipment reverts to King Finance upon termination of the lease. The equipment is not of a specialized use. Goring Dairy's incremental borrowing rate is 8% per year. The implicit rate is also 8%. Goring Dairy depreciates similar equipment that it owns on a straight-line basis. Collectibility of the payments is probable.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
dont uplode image in answer
Transcribed Image Text:Goring Dairy leases its milking equipment from King Finance Company under the following lease terms.
1.
2.
3.
4.
5.
6.
The lease term is 10 years, noncancelable, and requires equal rental payments of $30,300 due at the beginning of each year
starting January 1, 2020.
The equipment has a fair value at the commencement of the lease (January 1, 2020) of $242,741 and a cost of $180,000 on
King Finance's books. It also has an estimated economic life of 15 years and an expected residual value of $45,000, though
Goring Dairy has guaranteed a residual value of $50,000 to King Finance.
The lease contains no renewal options, and the equipment reverts to King Finance upon termination of the lease. The
equipment is not of a specialized use.
Goring Dairy's incremental borrowing rate is 8% per year. The implicit rate is also 8%.
Goring Dairy depreciates similar equipment that it owns on a straight-line basis.
Collectibility of the payments is probable.
Click here to view factor tables.
Transcribed Image Text:(c)
* Your answer is incorrect.
What would have been the amount of the initial lease liability recorded by the lessee upon the commencement of the lease if:
(Round answers to O decimal places, e.g. 5,250.)
(1)
(2)
The residual value of $50,000 had been guaranteed by a third party, not the lessee?
The residual value of $50,000 had not been guaranteed at all?
LA
LA
242741
242741
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education