Laura Leasing Company signs an agreement on January 1, 2020, to lease équipment to Larkspur Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with norenewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2020, is $63.000. 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 $5,000, none of which is guaranteed. The agreement requires equal annual rental payments of $20.289 to the lessor, beginning on January 1, 2020. 4. 5. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. 6. Larkspur uses the straight-line depreciation method for all equipment. Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to 0 decimal places, eg. 5,265.) LARKSPUR COMPANY (Lessee) Lease Amortization Schedule Annual Lease Interest on Reduction of Lease Payment Liability Liability Lease Liability 24 24 24
Laura Leasing Company signs an agreement on January 1, 2020, to lease équipment to Larkspur Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with norenewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2020, is $63.000. 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 $5,000, none of which is guaranteed. The agreement requires equal annual rental payments of $20.289 to the lessor, beginning on January 1, 2020. 4. 5. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. 6. Larkspur uses the straight-line depreciation method for all equipment. Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to 0 decimal places, eg. 5,265.) LARKSPUR COMPANY (Lessee) Lease Amortization Schedule Annual Lease Interest on Reduction of Lease Payment Liability Liability Lease Liability 24 24 24
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 3E: Lessee Accounting Issues Sax Company signs a lease agreement dated January 1, 2019, that provides...
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