Question
Exercise 21-15 Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Kingbird Company. The following information relates to this agreement.
Exercise 21-15
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Kingbird Company. The following information relates to this agreement.
1.The term of the non-cancelable lease is 3 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, 2020, is $56,000.3.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 $3,000, none of which is guaranteed.4.The agreement requires equal annual rental payments of $18,479 to the lessor, beginning on January 1, 2020.5.The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee.6.Kingbird uses the straight-line depreciation method for all equipment.
Click here to view factor tables.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
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