Answered step by step
Verified Expert Solution
Question
...
1 Approved Answer
Lease facts: Date of lease 6/1/19 Term 3 years (expires 6/1/22) Semi-annual lease payments of $100,000 every 6/1 and 12/1 Lessees incremental borrowing rate 6%
Lease facts:
- Date of lease 6/1/19
- Term 3 years (expires 6/1/22)
- Semi-annual lease payments of $100,000 every 6/1 and 12/1
- Lessees incremental borrowing rate 6%
- Lessors implicit rate of return 5% (NOT known to lessee)
- Lessors cost of asset leased - $250,000
- Guaranteed residual value - $70,000 (lessee believes fair value of the asset at the end of the lease will be greater than $70,000).
- Lessee and Lessor both have a December 31st yearend.
Requirements:
- Assume the lease is treated as a finance lease:
- Determine the present value of the lease payments
- Prepare an amortization table for the lease payments for the lessee
- Prepare all of the lessees required journal entries for 2019 and 2020
- Determine the fair value of the lease from the lessors perspective
- Prepare the lessors amortization table for this lease
- Prepare all of the lessors required journal entries for 2019 and 2020
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started