Ravis Rent-A-Car Company leases a car to Ira Reem, an employee, on January 1, 2019. The term of the noncancelable lease is 4 years. The following information about the lease is provided:1.Title to the car passes to Ira on the termination of the lease with no additional payment required by the lessee.2.The cost and fair value of the car is $8,400. The car has an economic life of 5 years.3.The interest rate implicit in the lease is 10%.4.It is probable that Ravis will collect the lease payments.5.Equal annual lease payments are due at the end of each year. Prepare a table summarizing the lease receipts and interest income earned by the Ravis Rent-A-Car for the 4-year lease term.Additional Instructions Ravis Rent-A-Car CompanySummary of Lease Payments Received and Interest Income Earned (by Interest Method)1DateAnnual Lease Payments ReceivedInterest Income at 10% on Lease ReceivableReduction of Lease ReceivableLease Receivable2January 1, 2019 3December 31, 2019 4December 31, 2020 5December 31, 2021 6December 31, 2022

Answered: Prepare a table summarizing the lease…

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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Ravis Rent-A-Car Company leases a car to Ira Reem, an employee, on January 1, 2019. The term of the noncancelable lease is 4 years. The following information about the lease is provided:

1.	Title to the car passes to Ira on the termination of the lease with no additional payment required by the lessee.
2.	The cost and fair value of the car is $8,400. The car has an economic life of 5 years.
3.	The interest rate implicit in the lease is 10%.
4.	It is probable that Ravis will collect the lease payments.
5.	Equal annual lease payments are due at the end of each year.

Prepare a table summarizing the lease receipts and interest income earned by the Ravis Rent-A-Car for the 4-year lease term.

Additional Instructions

Ravis Rent-A-Car Company

Summary of Lease Payments Received and Interest Income Earned (by Interest Method)

1	Date	Annual Lease Payments Received	Interest Income at 10% on Lease Receivable	Reduction of Lease Receivable	Lease Receivable
2	January 1, 2019
3	December 31, 2019
4	December 31, 2020
5	December 31, 2021
6	December 31, 2022

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