ssor spent $580,000 to manufacture the equipment and u 198,228 beginning January 1, the beginning of the lease. L osts of consummating the lease transaction incurred by the That is the effect of the lease on the lessor's earnings duri
ssor spent $580,000 to manufacture the equipment and u 198,228 beginning January 1, the beginning of the lease. L osts of consummating the lease transaction incurred by the That is the effect of the lease on the lessor's earnings duri
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Brief Exercise 15-16 (Algo) Lessor's Initial direct costs; sales-type lease [LO15-3, 15-7]
Bryant leased equipment that had a retall cash selling price of $700,000 and a useful life of four years with no residual value. The
lessor spent $580,000 to manufacture the equipment and used an implicit rate of 9% when calculating annual lease payments of
$198.228 beginning January 1, the beginning of the lease. Lease payments will be made January 1 each year of the lease. Incremental
costs of consummating the lease transaction incurred by the lessor were $20,000.
What is the effect of the lease on the lessor's earnings during the first year, not including any effect of depreciation no longer required
on the asset under lease (Ignore taxes)?
Note: Input decreases to Income as negative amounts.
Impact on lessor's pretax earnings](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F63f7ac09-67ad-4858-a21c-e5ea91cdf694%2F169f90ff-89d0-4982-bcd8-d50940286949%2Fxvsgiyo_processed.png&w=3840&q=75)
Transcribed Image Text:Brief Exercise 15-16 (Algo) Lessor's Initial direct costs; sales-type lease [LO15-3, 15-7]
Bryant leased equipment that had a retall cash selling price of $700,000 and a useful life of four years with no residual value. The
lessor spent $580,000 to manufacture the equipment and used an implicit rate of 9% when calculating annual lease payments of
$198.228 beginning January 1, the beginning of the lease. Lease payments will be made January 1 each year of the lease. Incremental
costs of consummating the lease transaction incurred by the lessor were $20,000.
What is the effect of the lease on the lessor's earnings during the first year, not including any effect of depreciation no longer required
on the asset under lease (Ignore taxes)?
Note: Input decreases to Income as negative amounts.
Impact on lessor's pretax earnings
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