Problem 21-01

The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pearl Company, a lessee.

Commencement date		January 1,
Annual lease payment due at the beginning of each year, beginning with January 1,		$114,639
Residual value of equipment at end of lease term, guaranteed by the lessee		$53,000
Expected residual value of equipment at end of lease term		$48,000
Lease term		6	years
Economic life of leased equipment		6	years
Fair value of asset at January 1,		$620,000
Lessors implicit rate		7	%
Lessees incremental borrowing rate		7	%

The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.

Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to O decimal places e.g. 5,275.) PEARL COMPANY (Lessee) Lease Amortization Schedule Interest on Reduction of Lease Liability Liability Annual Lease Payment Plus GRV Lease Liability Date 1/1/20 $ 1/1/20 1/1/21 1/1/22 1/1/23 1/1/24 1/1/25 12/31/26