Exercise 21-10 (Part Level Submission)

The following facts pertain to a non-cancelable lease agreement between Sunland Leasing Company and Splish Brothers Company, a lessee.

Commencement date		May 1, 2020
Annual lease payment due at the beginning of
each year, beginning with May 1, 2020		$17,225.30
Bargain purchase option price at end of lease term		$4,000
Lease term		5	years
Economic life of leased equipment		10	years
Lessors cost		$55,000
Fair value of asset at May 1, 2020		$77,000
Lessors implicit rate		8	%
Lessees incremental borrowing rate		8	%

The collectibility of the lease payments by Sunland is probable. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

(a)

	Your answer is correct.

Discuss the nature of this lease to Splish Brothers.

The nature of this lease to Splish Brothers is a

sales-typefinanceoperating

lease.

SHOW LIST OF ACCOUNTS

SHOW SOLUTION

SHOW ANSWER

LINK TO TEXT

LINK TO TEXT

Attempts: 2 of 3 used

(b)

	Your answer is correct.

Discuss the nature of this lease to Sunland.

The nature of this lease to Sunland is a

financesales-typeoperating

lease.

SHOW LIST OF ACCOUNTS

SHOW SOLUTION

SHOW ANSWER

LINK TO TEXT

LINK TO TEXT

Attempts: 2 of 3 used

(c)

Prepare a lease amortization schedule for Splish Brothers for the 5-year lease term. (Round answers to 2 decimal places, e.g. 5,275.15.)

SPLISH BROTHERS COMPANY (Lessee) Lease Amortization Schedule
Date		Annual Lease Payment Plus BPO		Interest on Liability		Reduction of Lease Liability		Lease Liability
5/1/20		$		$		$		$
5/1/20
5/1/21
5/1/22
5/1/23
5/1/24
4/30/25
		$		$		$

SHOW LIST OF ACCOUNTS

LINK TO TEXT

LINK TO TEXT

Attempts: 0 of 3 used

SAVE FOR LATER

SUBMIT ANSWER

(d) The parts of this question must be completed in order. This part will be available when you complete the part above.