Question
Flint Company leased equipment to Land Company for a ve-year period. Flint paid $140,895 for the equipment, which equals its current carrying value (with estimated
Flint Company leased equipment to Land Company for a ve-year period. Flint paid $140,895 for the equipment, which equals its current carrying value (with estimated useful life of ve years). The lease commenced on January 1 of Year 1. Flint uses a target rate of return of 8% in all lease contracts. The rst payment was received on January 1 of Year 1, and Flints accounting periods end on December 31. The equipment reverts to Flint at the end of the lease term, at which time Flint estimates that the equipment will have an unguaranteed residual value of $6,000. Hint: Underlying assets carrying value equals its fair value at lease commencement. a. Compute the annual payment calculated by the lessor.
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