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Morgan Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information elates to this agreement. 1. 2. 3. 4. 5. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. The cost of the asset to the lessor is $245,000. The fair value of the asset at January 1, 2020, is $245,000. 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 $24,335, none of which is guaranteed. The agreement requires equal annual rental payments, beginning on January 1, 2020. Collectibility of the lease payments by Morgan is probable.

Morgan Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information elates to this agreement. 1. 2. 3. 4. 5. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. The cost of the asset to the lessor is $245,000. The fair value of the asset at January 1, 2020, is $245,000. 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 $24,335, none of which is guaranteed. The agreement requires equal annual rental payments, beginning on January 1, 2020. Collectibility of the lease payments by Morgan is probable.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Morgan Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement. 1. 2. 3. 4. 5. (a) The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. The cost of the asset to the lessor is $245,000. The fair value of the asset at January 1, 2020, is $245,000. 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 $24,335, none of which is guaranteed. The agreement requires equal annual rental payments, beginning on January 1, 2020. Collectibility of the lease payments by Morgan is probable. * Your answer is incorrect. Assuming the lessor desires a 8% 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 O decimal places e.g. 5,275.) Amount of the annual rental payment $ eTextbook and Media 52997
Transcribed Image Text:Morgan Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement. 1. 2. 3. 4. 5. (a) The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. The cost of the asset to the lessor is $245,000. The fair value of the asset at January 1, 2020, is $245,000. 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 $24,335, none of which is guaranteed. The agreement requires equal annual rental payments, beginning on January 1, 2020. Collectibility of the lease payments by Morgan is probable. * Your answer is incorrect. Assuming the lessor desires a 8% 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 O decimal places e.g. 5,275.) Amount of the annual rental payment $ eTextbook and Media 52997
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