Ivanhoe Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $92,000. Under the3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a3-year useful life and no residual value. The lease was signed on January 1, 2020. Ivanhoe expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020. Click here to view factor tables. (b) Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved.
Ivanhoe Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $92,000. Under the3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a3-year useful life and no residual value. The lease was signed on January 1, 2020. Ivanhoe expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020. Click here to view factor tables. (b) Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Ivanhoe Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $92,000.
Under the3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a3-year
useful life and no residual value. The lease was signed on January 1, 2020. Ivanhoe expects to earn an 8% return on its investment, and
this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020.
Click here to view factor tables.
(b)
Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g.
5,275.)
Date
1/1/20
12/31/20
12/31/21
12/31/22
$
Rent Receipt/ Payment
Interest Revenue/ Expense
$
$
+A
Reduction of Principal
Receiv
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