P21-6 (L02,4) (Lessee Entries with Residual Value) The following facts pertain to a noncancelable lease agreement between Faldo Leasing Company and Vance Company, a lessee. Inception date Annual lease payment due at the beginning of January 1, 2017 each year, beginning with January 1, 2017 $124,798 Residual value of equipment at end of lease term, guaranteed by the lessee Lease term Economic life of leased equipment Fair value of asset at January 1, 2017 Lessor's implicit rate Lessee's incremental borrowing rate $50,000 6 years 6 years $600,000 12% 12% The lessee assumes responsibility for all executory costs, which are expected to amount to $5,000 per year. The asset will revert to the lessor at the end of the lease term. The lessee has guaranteed the lessor a residual value of $50,000. The lessee uses the straight- line depreciation method for all equipment.
P21-6 (L02,4) (Lessee Entries with Residual Value) The following facts pertain to a noncancelable lease agreement between Faldo Leasing Company and Vance Company, a lessee. Inception date Annual lease payment due at the beginning of January 1, 2017 each year, beginning with January 1, 2017 $124,798 Residual value of equipment at end of lease term, guaranteed by the lessee Lease term Economic life of leased equipment Fair value of asset at January 1, 2017 Lessor's implicit rate Lessee's incremental borrowing rate $50,000 6 years 6 years $600,000 12% 12% The lessee assumes responsibility for all executory costs, which are expected to amount to $5,000 per year. The asset will revert to the lessor at the end of the lease term. The lessee has guaranteed the lessor a residual value of $50,000. The lessee uses the straight- line depreciation method for all equipment.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Prepare an amortization schedule that would be suitable for the lessee for the lease term
Transcribed Image Text:P21-6 (L02,4) (Lessee Entries with Residual Value) The following facts pertain to a noncancelable lease agreement between
Faldo Leasing Company and Vance Company, a lessee.
Inception date
Annual lease payment due at the beginning of
January 1, 2017
each year, beginning with January 1, 2017
$124,798
Residual value of equipment at end of lease term,
guaranteed by the lessee
Lease term
Economic life of leased equipment
Fair value of asset at January 1, 2017
Lessor's implicit rate
Lessee's incremental borrowing rate
$50,000
6 years
6 years
$600,000
12%
12%
The lessee assumes responsibility for all executory costs, which are expected to amount to $5,000 per year. The asset will revert to
the lessor at the end of the lease term. The lessee has guaranteed the lessor a residual value of $50,000. The lessee uses the straight-
line depreciation method for all equipment.
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