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Forty-Niner Corp., a private corporation that adheres to ASPE, is a manufacturer of truck trailers. On January 1, 2023, Forty-Niner leases ten trailers to
Forty-Niner Corp., a private corporation that adheres to ASPE, is a manufacturer of truck trailers. On January 1, 2023, Forty-Niner leases ten trailers to Gold Digger Inc. under a six-year non-cancellable lease agreement. The following information about the lease and the trailers is provided: 1. Equal annual payments, payable on January 1 every during the lease term, will provide Forty-Niner with an 8% return on their investment. 2. Title to the trailers will pass to Gold Digger at the end of the lease. 3. On January 1, 2023, the fair value of each trailer is $50,000. The cost of each trailer to Forty-Niner Corp. is $45,000. Each trailer has an expected useful life of nine years. Forty-Niner uses a straight-line depreciation and book the entry as year-end adjustment. 4. Collectability of the lease payments is reasonably assured, and any non-reimbursable costs under the lease that are likely to be incurred by Forty-Niner can be reasonably estimated. Instructions a) Calculate the annual lease payment. Present value factor for 6 periods at 8% is 4.62288. Round to the nearest dollar. (2 marks) b) Identify and explain what type of lease this is for the lessor. (2 marks) c) Prepare a lease amortization schedule for Forty-Niner Corp. from January 1, 2023, to January 1, 2026. Round to the nearest dollar. (2 marks) d) Prepare the journal entries for the lessor for 2023 and 2024 to record the lease agreement, the receipt of the lease rentals, and the recognition of income. Assume the use of a perpetual inventory system and
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