Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Plote Company. The following information relates to this agreement. 1. 2. 3. 4. 5. 6. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2020, is $80,000. 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 $7,000, none of which is guaranteed. The agreement requires equal annual rental payments of $25,563 to the lessor, beginning on January 1, 2020. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. Plote uses the straight-line depreciation method for all equipment. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to O decimal places, e.g. 5,265.) Date 1/1/20 1/1/20 1/1/21 1/1/22 LA Annual Lease Payment LA PLOTE COMPANY (Lessee) Lease Amortization Schedule Interest on Liability $ LA Reduction of Lease Liability Lease Liabilit
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Plote Company. The following information relates to this agreement. 1. 2. 3. 4. 5. 6. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2020, is $80,000. 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 $7,000, none of which is guaranteed. The agreement requires equal annual rental payments of $25,563 to the lessor, beginning on January 1, 2020. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. Plote uses the straight-line depreciation method for all equipment. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to O decimal places, e.g. 5,265.) Date 1/1/20 1/1/20 1/1/21 1/1/22 LA Annual Lease Payment LA PLOTE COMPANY (Lessee) Lease Amortization Schedule Interest on Liability $ LA Reduction of Lease Liability Lease Liabilit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Plote Company. The following information
relates to this agreement.
1.
2.
3.
4.
5.
6.
The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5
years.
The fair value of the asset at January 1, 2020, is $80,000.
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
$7,000, none of which is guaranteed.
(a)
The agreement requires equal annual rental payments of $25,563 to the lessor, beginning on January 1, 2020.
The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee.
Plote uses the straight-line depreciation method for all equipment.
Click here to view factor tables.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to O decimal places, e.g.
5,265.)
Date
1/1/20
1/1/20
1/1/21
1/1/22
$
$
Annual Lease
Payment
$
$
PLOTE COMPANY (Lessee)
Lease Amortization Schedule
Interest on
Liability
$
$
Reduction of Lease
Liability
$
Lease Liabilit
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