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Please show work. Monty Corporation leased equipment to Teal Mountain, Inc. on January 1, 2020. The lease agreement called for annual rental payments of $1,350
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Monty Corporation leased equipment to Teal Mountain, Inc. on January 1, 2020. The lease agreement called for annual rental payments of $1,350 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $8,600, a book value of $6,600, and Monty expects a residual value of $6,100 at the end of the lease term. Monty set the lease payments with the intent of earning a 8% return, though Teal Mountain is unaware of the rate implicit in the lease and has an incremental borrowing rate of 10%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) How would the measurement of the lease liability and right-of-use asset be affected if, as a result of the lease contract, Teal Mountain was also required to pay $600 in commissions, prepay $800 in addition to the first rental payment, and pay $200 of insurance each year? (Round answers to O decimal places, e.g. 5,275.) Lease liability $ Right-of-use-asset $Step by Step Solution
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