Sunland Leasing Company agrees to lease equipment to Coronado Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $489,000, and the fair value of the asset on January 1, 2020, is $699,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Coronado estimates that the expected residual value at the end of the lease term will be 60,000. Coronado amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Sunland desires a 9% rate of return on its investments. Coronado’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. (a) Your answer has been saved. See score details after the due date. Discuss the nature of this lease for both the lessee and the lessor. This is a for Coronado. This is a for Sunland. Attempts: 1 of 1 used (b) Your answer has been saved. See score details after the due date. Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Annual rental payment $ Attempts: 1 of 1 used (c) Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Present value of minimum lease payments $ Save for Later Attempts: 0 of 1 used Submit Answer (d)

Sunland Leasing Company agrees to lease equipment to Coronado Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $489,000, and the fair value of the asset on January 1, 2020, is $699,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Coronado estimates that the expected residual value at the end of the lease term will be 60,000. Coronado amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Sunland desires a 9% rate of return on its investments. Coronado’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. (a) Your answer has been saved. See score details after the due date. Discuss the nature of this lease for both the lessee and the lessor. This is a for Coronado. This is a for Sunland. Attempts: 1 of 1 used (b) Your answer has been saved. See score details after the due date. Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Annual rental payment $ Attempts: 1 of 1 used (c) Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Present value of minimum lease payments $ Save for Later Attempts: 0 of 1 used Submit Answer (d)

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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(a)

Your answer has been saved. See score details after the due date.

Discuss the nature of this lease for both the lessee and the lessor.

This is a for Coronado.

This is a for Sunland.

Attempts: 1 of 1 used

(b)

Your answer has been saved. See score details after the due date.

Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.)

Annual rental payment

Attempts: 1 of 1 used

(c)

Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.)

Present value of minimum lease payments

Save for Later

Attempts: 0 of 1 used

Submit Answer

(d)

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1.		The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.
2.		The cost of the machinery is $489,000, and the fair value of the asset on January 1, 2020, is $699,000.
3.		At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Coronado estimates that the expected residual value at the end of the lease term will be 60,000. Coronado amortizes all of its leased equipment on a straight-line basis.
4.		The lease agreement requires equal annual rental payments, beginning on January 1, 2020.
5.		The collectibility of the lease payments is probable.
6.		Sunland desires a 9% rate of return on its investments. Coronado’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown.