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1. ABC Co. (lessee) signs a lease agreement on July 1st, 2018 to lease equipment from Daly Leasing Company (lessor). The following data relates to
1. ABC Co. (lessee) signs a lease agreement on July 1st, 2018 to lease equipment from Daly Leasing Company (lessor). The following data relates to this lease agreement: (1) The term of the non-cancelable lease is 4 years, with no renewal option. The asset will return to the lessor at the end of a lease term. (2) Payments of 195,989 are due on July 1st of each year. The first payment is made at the inception of this lease. This payment includes $300 for propery tax (executory costs). (3) The fair value of the equipment on July 1st, 2018 is $700,000. The useful economic life of this equipment is 6 years, with no salvage value (4) ABC s incremental borrowing rate is 8% per year. The implicit rate used by Daly Leasing Company in computing the lease payments is 890. (5) ABC Co, uses straight-line method to depreciate this equipment. (6) Collectbility of the paym uncertainties surrouding the costs yet ot be incurred by the lessor ents is reasonably predictable, and there are no important
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