Ryan (lessee) leased a backhoe with a useful life of 15 years from StoneCo (lessor) on January 1, 20X8. StoneCo approximated a 12% rate when crafting the lease agreement, but Ryan was not privy to that information. The equipment has a fair value of $190,000 and StoneCo's cost is $172,000. A third party has guaranteed the residual value $12,000. Stone paid $3,000 in legal fees during December 20X7 prior to executing the lease agreement. Ryan's incremental borrowing rate is 10%. Under the lease agreement, ten annual lease payments of $27,480 are due each January 1, beginning January 1, 20X8. Ryan paid $1,500 of initial direct costs (commission paid to a lease negotiator). Ignoring taxes, what is the total expense related to the lease reported on Ryan's 20X8 income statement
Ryan (lessee) leased a backhoe with a useful life of 15 years from StoneCo (lessor) on January 1, 20X8. StoneCo approximated a 12% rate when crafting the lease agreement, but Ryan was not privy to that information. The equipment has a fair value of $190,000 and StoneCo's cost is $172,000. A third party has guaranteed the residual value $12,000. Stone paid $3,000 in legal fees during December 20X7 prior to executing the lease agreement. Ryan's incremental borrowing rate is 10%. Under the lease agreement, ten annual lease payments of $27,480 are due each January 1, beginning January 1, 20X8. Ryan paid $1,500 of initial direct costs (commission paid to a lease negotiator).
Ignoring taxes, what is the total expense related to the lease reported on Ryan's 20X8 income statement?
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