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Atchafalaya Corp. is a manufacturer of truck trailers. On January 1,20X1, Atchafalaya Corp. leases ten trailers to a company under a six year noncancellable lease
Atchafalaya Corp. is a manufacturer of truck trailers. On January 1,20X1, Atchafalaya Corp. leases ten trailers to a company under a six year noncancellable lease agreement. The following information about the lease and the trailers is provided below. ATCHAFALAYA CORP. LEASE INFORMATION FOR LEASING TRAILERS (a) Equal annual payments that are due on December 31 each year provide Atchafalaya Corp with an 8% return on net investment. (b) |Titles to the trailers pass to the lessee at the end of the lease. (c) |The fair value of each trailer is S50,000. The cost of each trailer to Atchafalaya Corp. is S45,000. Each trailer has an expected useful life of nine years. (d) Collectibility of the lease payments is reasonably predictable and there are no important uncertainties surrounding the amount of costs yet to be incurred by Atchafalaya Corp
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