Question
On December 31, 2021, Tiny Tims Tech, Inc. a private company who follows ASPE, leased a color copier from Cory Copy Corporation at a price
On December 31, 2021, Tiny Tims Tech, Inc. a private company who follows ASPE, leased a color copier from Cory Copy Corporation at a price of $479,079. The lease agreement specifies annual payments beginning December 31, 2021, the inception of the lease, and at each December 31 through 2026. The estimated useful life of the copier is seven years. At the end of the six-year lease term the copier is expected to have a residual value of $60,000 which is guaranteed by Tiny Tims Tech Inc.
Cory Copy manufactured the copier at a cost of $300,000.
Cory Copys interest rate for financing the transaction is 10%.
Instructions
a. Calculate the lease payment of the lease that the Lessor should charge Lessee.
b. Calculate the PV of minimum lease payments, Determine the classification of the lease. for Lessee.
c. Use a financial calculator to calculate the following amount of each of the following
Gross Investment for lessor
Net Investment for lessor
Unearned Interest Income for lessor
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