Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Tamarisk Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2020, is $74,000. 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 $3,000, none of which is guaranteed. 4. The agreement requires equal annual rental payments of $24,716 to the lessor, beginning on January 1, 2020. 5. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. 6. Tamarisk uses the straight-line depreciation method for all equipment.
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Tamarisk Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2020, is $74,000. 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 $3,000, none of which is guaranteed. 4. The agreement requires equal annual rental payments of $24,716 to the lessor, beginning on January 1, 2020. 5. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. 6. Tamarisk uses the straight-line depreciation method for all equipment.
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 2E: Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement...
Related questions
Question
![Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Tamarisk Company. The following information
relates to this agreement.
1.
The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5
years.
2.
The fair value of the asset at January 1, 2020, is $74,000.
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
$3,000, none of which is guaranteed.
4.
The agreement requires equal annual rental payments of $24,716 to the lessor, beginning on January 1, 2020.
5.
The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee.
6.
Tamarisk 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
TAMARISK COMPANY (Lessee)
Lease Amortization Schedule
Annual Lease
Payment
Interest on
Liability
Reduction of Lease
Liability
Lease Liabilit
SUPPORT](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd91b8922-8300-4422-9006-fe2f041b4303%2Fb1ad2418-848b-4c9a-be02-9b14bfc0c1c1%2Fe57riww_processed.png&w=3840&q=75)
Transcribed Image Text:Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Tamarisk Company. The following information
relates to this agreement.
1.
The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5
years.
2.
The fair value of the asset at January 1, 2020, is $74,000.
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
$3,000, none of which is guaranteed.
4.
The agreement requires equal annual rental payments of $24,716 to the lessor, beginning on January 1, 2020.
5.
The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee.
6.
Tamarisk 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
TAMARISK COMPANY (Lessee)
Lease Amortization Schedule
Annual Lease
Payment
Interest on
Liability
Reduction of Lease
Liability
Lease Liabilit
SUPPORT
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
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 4 steps with 5 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
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
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning