Question
AyayaiCompany, a machinery dealer, leased manufacturing equipment to Mays Corporation on January 1, 2017. The lease is for a 7-year period and requires equal annual
AyayaiCompany, a machinery dealer, leased manufacturing equipment to Mays Corporation on January 1, 2017. The lease is for a 7-year period and requires equal annual payments of $21,157at the beginning of each year. The first payment is received on January 1, 2017.
Ayayaihad purchased the machine during 2016 for $80,000. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred byAyayai.Ayayaiset the annual rental to ensure an7% rate of return.
The machine has an economic life of 8 years with no residual value and reverts toAyayaiat the termination of the lease.
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