Monk Company, a dealer in machinery and equipment, leased equipment with a 10-year life to Leland Inc. on July 1, 2014. The lease is appropriately accounted for as a sale by Monk and as a purchase by Leland. The lease is for an eight-year period, expiring June 30, 2022. The first of eight equal payments of $300,000 is due on June 30, 2015. Leland has an option to purchase the equipment on June 30, 2022, for $100,000 even though the expected residual value at that time is $600,000. Leland’s incremental borrowing rate is 7%, and it uses straight-line depreciation. The equipment is expected to have a salvage value of zero at June 30, 2024. Required: 2. Prepare Leland’s amortization table for the leased equipment.
Monk Company, a dealer in machinery and equipment, leased equipment with a 10-year life to Leland Inc. on July 1, 2014. The lease is appropriately accounted for as a sale by Monk and as a purchase by Leland. The lease is for an eight-year period, expiring June 30, 2022. The first of eight equal payments of $300,000 is due on June 30, 2015. Leland has an option to purchase the equipment on June 30, 2022, for $100,000 even though the expected residual value at that time is $600,000. Leland’s incremental borrowing rate is 7%, and it uses straight-line
Required:
2. Prepare Leland’s amortization table for the leased equipment.
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