Exercise 21-05

Morgan Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement.

1.		The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years.
2.		The cost of the asset to the lessor is $245,000. The fair value of the asset at January 1, 2020, is $245,000.
3.		The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $24,335, none of which is guaranteed.
4.		The agreement requires equal annual rental payments, beginning on January 1, 2020.
5.		Collectibility of the lease payments by Morgan is probable.

Click here to view factor tables.

	Your answer is correct.

Assuming the lessor desires a 8% rate of return on its investment, calculate the amount of the annual rental payment required. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and the final answer to 0 decimal places e.g. 5,275.)

Amount of the annual rental payment

$enter the Amount of the annual rental payment in dollars

SHOW LIST OF ACCOUNTS

SHOW SOLUTION

SHOW ANSWER

LINK TO TEXT

LINK TO TEXT

	Your answer is correct.

Prepare an amortization schedule that is suitable for the lessor for the lease term. (Round answers to 0 decimal places e.g. 5,275.)

MORGAN LEASING COMPANY (Lessor) Lease Amortization Schedule
Date		Annual Lease Payment Plus URV		Interest on Lease Receivable		Recovery of Lease Receivable		Lease Receivable
1/1/20		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
1/1/20		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
1/1/21		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
1/1/22		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
1/1/23		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
1/1/24		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
1/1/25		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
12/31/25		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
		$enter a total amount for this column		$enter a total amount for this column		$enter a total amount for this column