View Policies Current Attempt In Progress Wildhorse Company leases a building to Windsor, Inc. on January 1, 2020. The following facts pertain to the lease agreement. 1. 2. 3. 4. 5. The lease term is 6 years, with equal annual rental payments of $3.933 at the beginning of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The building has a fair value of $22,000, a book value to Wildhorse of $15,000, and a useful life of 7 years. At the end of the lease term, Wildhorse and Windsor expect there to be an unguaranteed residual value of $3,750. Wildhorse wants to earn a return of 8% on the lease, and collectibility of the payments is probable. Windsor was unaware of the implicit rate used in the lease by Wildhorse and has an incremental borrowing rate of 9%. Click here to view factor tables. How would Wildhorse (lessor) and Windsor (lessee) classify this lease? Wildhorse would classify the lease as a Windsor would classify the lease as a ✓ lease. lease.
View Policies Current Attempt In Progress Wildhorse Company leases a building to Windsor, Inc. on January 1, 2020. The following facts pertain to the lease agreement. 1. 2. 3. 4. 5. The lease term is 6 years, with equal annual rental payments of $3.933 at the beginning of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The building has a fair value of $22,000, a book value to Wildhorse of $15,000, and a useful life of 7 years. At the end of the lease term, Wildhorse and Windsor expect there to be an unguaranteed residual value of $3,750. Wildhorse wants to earn a return of 8% on the lease, and collectibility of the payments is probable. Windsor was unaware of the implicit rate used in the lease by Wildhorse and has an incremental borrowing rate of 9%. Click here to view factor tables. How would Wildhorse (lessor) and Windsor (lessee) classify this lease? Wildhorse would classify the lease as a Windsor would classify the lease as a ✓ lease. lease.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question

Transcribed Image Text:How would Wildhorse initially measure the lease receivable, and how would Windsor initially measure the lease liability and right-of-
use asset? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places,
eg. 5,275.)
Lease receivable
$
Present value of lease pay $
Lease Liability/Right-of-Use Asset
Wildhorse
$
Windsor

Transcribed Image Text:Question 6 of 10
View Policies
Current Attempt In Progress
Wildhorse Company leases a building to Windsor, Inc. on January 1, 2020. The following facts pertain to the lease agreement.
1.
2.
3.
4.
5.
The lease term is 6 years, with equal annual rental payments of $3,933 at the beginning of each year.
Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a
specialized nature.
The building has a fair value of $22,000, a book value to Wildhorse of $15,000, and a useful life of 7 years.
At the end of the lease term, Wildhorse and Windsor expect there to be an unguaranteed residual value of $3,750.
Wildhorse wants to earn a return of 8% on the lease, and collectibility of the payments is probable. Windsor was unaware of
the implicit rate used in the lease by Wildhorse and has an incremental borrowing rate of 9%.
Click here to view factor tables.
How would Wildhorse (lessor) and Windsor (lessee) classify this lease?
Wildhorse would classify the lease as a
Windsor would classify the lease as a
lease.
lease.
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