Larkspur Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $291,000. The fair value of the asset at January 1, 2020, is $291,000. 3. 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 $29,100, none of which is guaranteed. 4. The agreement requires equal annual rental payments, beginning on January 1, 2020. 5. Collectibility of the lease payments by Larkspur is probable. Click here to view factor tables. (a) Assuming the lessor desires a 9% rate of return on its investment, calculate the amount of the annual rental payment required. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and the final answer to 0 decimal places e.g. 5,275.) Amount of the annual rental payment $enter the Amount of the annual rental payment in dollars
Larkspur Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $291,000. The fair value of the asset at January 1, 2020, is $291,000. 3. 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 $29,100, none of which is guaranteed. 4. The agreement requires equal annual rental payments, beginning on January 1, 2020. 5. Collectibility of the lease payments by Larkspur is probable. Click here to view factor tables. (a) Assuming the lessor desires a 9% rate of return on its investment, calculate the amount of the annual rental payment required. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and the final answer to 0 decimal places e.g. 5,275.) Amount of the annual rental payment $enter the Amount of the annual rental payment in dollars
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Larkspur Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement.
Click here to view factor tables.
| 1. | The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. | |
| 2. | The cost of the asset to the lessor is $291,000. The fair value of the asset at January 1, 2020, is $291,000. | |
| 3. | 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 $29,100, none of which is guaranteed. | |
| 4. | The agreement requires equal annual rental payments, beginning on January 1, 2020. | |
| 5. | Collectibility of the lease payments by Larkspur is probable. |
Click here to view factor tables.
(a)
Assuming the lessor desires a 9% rate of return on its investment , calculate the amount of the annual rental payment required. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and the final answer to 0 decimal places e.g. 5,275.)
| Amount of the annual rental payment |
$enter the Amount of the annual rental payment in dollars
|
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