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Exercise 21-11 (Part Level Submission) Laura Leasing Company signs an agreement on January 1, 2014, to lease equipment to Plote Company. The following information relates
Exercise 21-11 (Part Level Submission)
Laura Leasing Company signs an agreement on January 1, 2014, to lease equipment to Plote Company. The following information relates to this agreement.
1. | The term of the noncancelable lease is 5 years with no renewal option. The equipment has an estimated economic life of 5 years. | |
2. | The fair value of the asset at January 1, 2014, is $89,700. | |
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 $6,520, none of which is guaranteed. | |
4. | Plote Company assumes direct responsibility for all executory costs, which include the following annual amounts: (1) $922 to Rocky Mountain Insurance Company for insurance and (2) $1,662 to Laclede County for property taxes. | |
5. | The agreement requires equal annual rental payments of $20,540.59 to the lessor, beginning on January 1, 2014. | |
6. | The lessees incremental borrowing rate is 12%. The lessors implicit rate is 10% and is known to the lessee. | |
7. | Plote Company uses the straight-line depreciation method for all equipment. | |
8. | Plote uses reversing entries when appropriate. |
Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and Round answers to 2 decimal places, e.g. 15.25.)
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