P21-13 (LO3,4) (Lessor Computations and Entries, Sales-Type Lease with Guaranteed Residual Value) Amirante Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $411,324, and its guaranteed residual value at the end of the noncancelable lease term is estimated to be $15,000. The hospital will pay rents of $60,000 at the beginning of each year and all maintenance, insurance, and taxes. Amirante Inc. incurred costs of $250,000 in manufacturing the machine and $14,000 in negotiating and closing the lease. Amirante Inc. has determined that the collectibility of the lease payments is reasonably predictable, that there will be no additional costs incurred, and that the implicit interest rate is 10%.

P21-13 (LO3,4) (Lessor Computations and Entries, Sales-Type Lease with Guaranteed Residual Value) Amirante Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $411,324, and its guaranteed residual value at the end of the noncancelable lease term is estimated to be $15,000. The hospital will pay rents of $60,000 at the beginning of each year and all maintenance, insurance, and taxes. Amirante Inc. incurred costs of $250,000 in manufacturing the machine and $14,000 in negotiating and closing the lease. Amirante Inc. has determined that the collectibility of the lease payments is reasonably predictable, that there will be no additional costs incurred, and that the implicit interest rate is 10%.

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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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

See attached picture

1. Duscuss the nature of this lease in relation to the lessor and compute the amount of each of the following items:

A. Lease receivable at inception of the lease

B. Sales Price

C. Cost of sales

P21-13 (LO3,4) (Lessor Computations and Entries, Sales-Type Lease with Guaranteed Residual Value) Amirante Inc.
manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of
10 years. The normal selling price of the machine is $411,324, and its guaranteed residual value at the end of the noncancelable
lease term is estimated to be $15,000. The hospital will pay rents of $60,000 at the beginning of each year and all maintenance,
insurance, and taxes. Amirante Inc. incurred costs of $250,000 in manufacturing the machine and $14,000 in negotiating and
closing the lease. Amirante Inc. has determined that the collectibility of the lease payments is reasonably predictable, that there
will be no additional costs incurred, and that the implicit interest rate is 10%.

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