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On September 1, 2020, Wildhorse Corporation, which uses ASPE, signed a 4-year, non-cancellable lease for a piece of equipment. The terms of the lease called

On September 1, 2020, Wildhorse Corporation, which uses ASPE, signed a 4-year, non-cancellable lease for a piece of equipment. The terms of the lease called for Wildhorse to make annual payments of $13,985 at the beginning of each lease year, starting September 1, 2020. The equipment has an estimated useful life of 6 years and a $7,000 unguaranteed residual value and a fair value on September 1, 2020, of $67,000. The equipment reverts back to the lessor at the end of the lease term. Wildhorse uses the straight-line method of depreciation for all of its plant assets, has a calendar year end, prepares adjusting journal entries at the end of the fiscal year, and does not use reversing entries. Wildhorses incremental borrowing rate is 11%, and the lessors implicit rate is unknown.

Present value of the minimum lease payments

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