36 con....Teal Leasing Company agrees to lease equipment to Flint Corporation on January 1, 2020. The following information relates to the lease agreement.1. The term of the lease is 6 years with no renewal option, and the machinery has an estimated economic life of 8 years.2. The cost of the machinery is $314,000, and the fair value of the asset on January 1, 2020, is $406,000.3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $36,300. Flint estimates that the expected residual value at the end of the lease term will be $36,300. Flint 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. Teal desires a 6% rate of return on its investments. Flint’s incremental borrowing rate is 8%, and the lessor’s implicit rate is unknown.(Assume the accounting period ends on December 31 and that neither company uses reversing entries.) (b) Incorrect answer iconYour answer is incorrect.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 $enter the annual rental payment in dollars rounded to 0 decimal places

Answered: Teal Leasing Company agrees to lease…

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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36 con....

Teal Leasing Company agrees to lease equipment to Flint Corporation on January 1, 2020. The following information relates to the lease agreement.

1.		The term of the lease is 6 years with no renewal option, and the machinery has an estimated economic life of 8 years.
2.		The cost of the machinery is $314,000, and the fair value of the asset on January 1, 2020, is $406,000.
3.		At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $36,300. Flint estimates that the expected residual value at the end of the lease term will be $36,300. Flint 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.		Teal desires a 6% rate of return on its investments. Flint’s incremental borrowing rate is 8%, and the lessor’s implicit rate is unknown.

(Assume the accounting period ends on December 31 and that neither company uses reversing entries.)

(b)

Incorrect answer icon

Your answer is incorrect.

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

$enter the annual rental payment in dollars rounded to 0 decimal places

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