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Ayayai Corporation entered into a lease agreement on January 1, 2017, to provide Blossom Company with a piece of machinery. The terms of the lease
Ayayai Corporation entered into a lease agreement on January 1, 2017, to provide Blossom Company with a piece of machinery. The terms of the lease agreement were as follows.
1. | The lease is to be for 3 years with rental payments of $11,200 to be made at the beginning of each year. | |
2. | The machinery has a fair value of $58,000, a book value of $40,000, and an economic life of 8 years. | |
3. | At the end of the lease term, both parties expect the machinery to have a residual value of $20,000, none of which is guaranteed. | |
4. | The lease does not transfer ownership at the end of the lease term, does not have a bargain purchase option, and the asset is not of a specialized nature. | |
5. | The implicit rate is 4%, which is known by Dawkins. | |
Collectibility of the payments is probable. Prepare the amortization schedules Blossom will use over the lease term. |
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