Flint Company leased equipment to Land Company for a ve-year period. Flint paid $9,393 for the equipment, which equals its current carrying value (with estimated

Flint Company leased equipment to Land Company for a five-year period. Flint paid $9,393 for the equipment, which equals its current carrying value (with estimated useful life of five years). The lease commenced on January 1 of Year 1. Flint uses a target rate of return of 8% in all lease contracts. The first payment was received on January 1 of Year 1, and Flint’s accounting periods end on December 31.

The lease contract contains a purchase option stating that Land Company can purchase the equipment for $800 on January 1 of Year 6, at which time its residual value is estimated to be $1,300. It is reasonably certain that Land Company will exercise the purchase option at the end of the lease term.

Required:

a. Compute the annual payment calculated by the lessor.

 

b. Prepare a schedule of the lease receivable for the lessor for the full lease term. Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Date Jan. 1, Year 1 Jan. 1, Year 1 $ Jan. 1, Year 2 Jan. 1, Year 3 Jan. 1, Year 4 Jan. 1, Year 5 Jan. 1, Year 6 Total $ Lease Payment 0 x $ 0 x 0 x 0 x 0 x 0 x 0 $ Interest Revenue 0 $ 0 x 0 x 0 x 0 x 0 x 0 $ Reduction of Lease Receivable tA $ 0 x 0 x 0 0 0 0 0 Lease Receivable 9393 0 x 0 x 0 0 0 0