Reporting Finance Lease, Guaranteed Residual-Lessee Mac Leasing Company (lessor) and Ash Corporation (lessee) signed a four-year lease on January 1 of Year 1. The underlying asset has an estimated life of six years and a fair value of $50,000, and the property reverts to Mac at the end of the lease term. Lease payments of $11,923 are payable on January 1 of each year beginning at the lease commencement and are set to yield Mac a return of 8%, which is known to Ash. The estimated residual value at the end of the lease term is $10,000 and is guaranteed by Ash Corporation. Ash expects the residual value at the end of the lease term to be $10,000. The lease contains no purchase option. Requireda. How would Ash Corporation classify the lease? Finance Lease b. What is the lease liability balance on January 1, the lease commencement date? Note: Round your answer to the nearest whole dollar. $ Estimated Residual = Guaranteed Residual, Estimated Residual< Guaranteed Residual Note: Round your answers to the nearest whole dollar.
Reporting Finance Lease, Guaranteed Residual-Lessee Mac Leasing Company (lessor) and Ash Corporation (lessee) signed a four-year lease on January 1 of Year 1. The underlying asset has an estimated life of six years and a fair value of $50,000, and the property reverts to Mac at the end of the lease term. Lease payments of $11,923 are payable on January 1 of each year beginning at the lease commencement and are set to yield Mac a return of 8%, which is known to Ash. The estimated residual value at the end of the lease term is $10,000 and is guaranteed by Ash Corporation. Ash expects the residual value at the end of the lease term to be $10,000. The lease contains no purchase option. Requireda. How would Ash Corporation classify the lease? Finance Lease b. What is the lease liability balance on January 1, the lease commencement date? Note: Round your answer to the nearest whole dollar. $ Estimated Residual = Guaranteed Residual, Estimated Residual< Guaranteed Residual Note: Round your answers to the nearest whole dollar.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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