3rd Edition

ISBN: 9780136912644

Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella

Publisher: Pearson Education (US)

Concept explainers

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

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Textbook Question

Chapter 18, Problem 18.5P

Classification as Finance or Operating Lease, Lessor, Journal Entries, Sales-Type Lease, Guaranteed Residual Value. Using the same information as found in P18-4, assume that the lease contains a guaranteed residual value of $15,000. The lessee guarantees the residual value.

Required

a. Compute the annual rent payment needed to ensure that the lessor company recovers the fair value of the vehicles.
b. Compute the present value of the lease payments using this new payment (exclude the guaranteed residual value from this part of the problem).
c. Prepare the amortization table required for the entire term. Use the new payment and guaranteed residual value.

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Chapter 18, Problem 18.4P

Chapter 18, Problem 18.6P

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Chapter 18 Solutions

Intermediate Accounting

Ch. 18 - Does the lessee become the owner of the equipment...Ch. 18 - Prob. 18.2Q Ch. 18 - Prob. 18.3Q Ch. 18 - What are typical terms and provisions in a lease...Ch. 18 - How does a lease offer business and financial...Ch. 18 - Prob. 18.6Q Ch. 18 - How is the right-of-use asset measured?Ch. 18 - What components are included in a lease contract?Ch. 18 - How does a lessee separate lease and nonlease...Ch. 18 - How does a lessor separate lease and nonlease...

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Solution Summary: The author explains that lease is a long term rent agreement between two parties that is often clubbed with other clauses relating to maintenance or sale at the end of the lease period.

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