Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to O decimal places, e.g. 5,265) PLOTE COMPANY (Lessee)
Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to O decimal places, e.g. 5,265) PLOTE COMPANY (Lessee)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![ompany signs an agreement on January 1, 2020, to lease equipment to Plote Company. The following information
relates to this agreement.
1.
2
3.
4.
5.
6.
The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5
years.
The fair value of the asset at January 1, 2020, is $80,000.
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
$7,000, none of which is guaranteed.
The agreement requires equal annual rental payments of $25,563 to the lessor, beginning on January 1, 2020.
The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee.
Plote uses the straight-line depreciation method for all equipment.
Click here to view factor tables.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2265b8bc-4098-4545-ad65-d615bcfa6dec%2Fa68f44f2-aac1-4445-a52d-75467c6ad573%2Fbwfvf3_processed.jpeg&w=3840&q=75)
Transcribed Image Text:ompany signs an agreement on January 1, 2020, to lease equipment to Plote Company. The following information
relates to this agreement.
1.
2
3.
4.
5.
6.
The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5
years.
The fair value of the asset at January 1, 2020, is $80,000.
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
$7,000, none of which is guaranteed.
The agreement requires equal annual rental payments of $25,563 to the lessor, beginning on January 1, 2020.
The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee.
Plote uses the straight-line depreciation method for all equipment.
Click here to view factor tables.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
![Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to O decimal places, e.g.
5,265)
Date
1/1/20
1/1/20
1/1/21
1/1/22
$
Annual Lease
Payment
25563
25563
25563
76689
$
PLOTE COMPANY (Lessee)
Lease Amortization Schedule
Interest on
Liability
0
1929
983
2912
$
Reduction of Lease
Liability
25563
23634
24580
73777
Lease Lial](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2265b8bc-4098-4545-ad65-d615bcfa6dec%2Fa68f44f2-aac1-4445-a52d-75467c6ad573%2Fr2i79hg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to O decimal places, e.g.
5,265)
Date
1/1/20
1/1/20
1/1/21
1/1/22
$
Annual Lease
Payment
25563
25563
25563
76689
$
PLOTE COMPANY (Lessee)
Lease Amortization Schedule
Interest on
Liability
0
1929
983
2912
$
Reduction of Lease
Liability
25563
23634
24580
73777
Lease Lial
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