Question
Exercise 21-12 (Part Level Submission) On January 1, 2020, Butter Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. The
Exercise 21-12 (Part Level Submission) On January 1, 2020, Butter Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $3,000, while the expected residual value at the end of the lease is $8,000. 2. Equal rental payments are due on January 1 of each year, beginning in 2020. 3. The fair value of the equipment on January 1. 2020. is $140.000. and its cost is $90.000. 4. The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis. 5. Butter set the annual rental to ensure a 5% rate of return. Flynn's incremental borrowing rate is 6%, and the implicit rate of the lessor is unknown. 6. Collectibility of lease payments by the lessor is probable. Both the lessor and the lessee's accounting periods end on December 31. H (a) Discuss the nature of this lease to Butter and Flynn. The nature of this lease for Butter is a sales-type lease. The nature of this lease for Flynn is a operating-type lease. (b) Your answer is incorrect. Try again. Calculate the amount of the annual rental payment. (Round answer t Annual rental payment 22096 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT
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