Question
BE20-11 Merrill Corporation, which uses ASPE, enters into a six-year lease of equipment on September 13, 2017 that requires six annual payments of $28,000 each,
BE20-11 Merrill Corporation, which uses ASPE, enters into a six-year lease of equipment on September 13, 2017 that requires six annual payments of $28,000 each, beginning September 13, 2017. In addition, Merrill guarantees the lessor a residual value of $17,000 at lease end. The equipment has a useful life of six years. Using tables, a fi nancial calculator, or Excel functions, calculate the amount of the capital lease and prepare Merrills September 13, 2017 journal entries, assuming an interest rate of 9%. Use the information for Merrill Corporation from BE20-11. Assume that a residual value of $17,000 is expected at the end of the lease, but that Merrill does not guarantee the residual value. Using tables, a financial calculator, or Excel functions, calculate the amount of the capital lease and prepare Merrills September 13, 2017 journal entries, assuming an interest rate of 9% and that Merrill also uses ASPE.
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