Indigo Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $524,166, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $16,500. The hospital will pay rents of $63,400 at the beginning of each year. Indigo incurred costs of $258,000 in manufacturing the machine and $14,900 in legal fees directly related to the signing of the lease. Indigo has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%.
Indigo Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $524,166, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $16,500. The hospital will pay rents of $63,400 at the beginning of each year. Indigo incurred costs of $258,000 in manufacturing the machine and $14,900 in legal fees directly related to the signing of the lease. Indigo has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
5...new..B
Indigo Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $524,166, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $16,500. The hospital will pay rents of $63,400 at the beginning of each year. Indigo incurred costs of $258,000 in manufacturing the machine and $14,900 in legal fees directly related to the signing of the lease. Indigo has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%.
(b)
Prepare a 10-year lease amortization schedule for Indigo, the lessor. (Round answers to 0 decimal places e.g. 5,275.)
|
INDIGO INC. (Lessor)
Lease Amortization Schedule (Annuity due basis, guaranteed residual value) |
||||||||
|
Beginning
of Year |
Annual Lease Payment
Plus Residual Value |
Interest on
Lease Receivable |
Recovery of Lease
Receivable |
Lease
Receivable |
||||
| Initial PV |
$
|
$
|
$
|
$
|
||||
| 1 |
|
|
|
|
||||
| 2 |
|
|
|
|
||||
| 3 |
|
|
|
|
||||
| 4 |
|
|
|
|
||||
| 5 |
|
|
|
|
||||
| 6 |
|
|
|
|
||||
| 7 |
|
|
|
|
||||
| 8 |
|
|
|
|
||||
| 9 |
|
|
|
|
||||
| 10 |
|
|
|
|
||||
| End of 10 |
|
|
|
|||||
|
$
|
$
|
$
|
Save for Later
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 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