problem 3 (45 pointa) on 1/1/17, Darien Company o Aztec Inc (Hessee) Terms of the agreenent Lessor) leased a new digital printing pres Intormation appear below. and other relevant At 1/1/2017: Fair market value of press- $29,121 (sase as Book Value) ected Residuat value of PreSS E lease end -3000 nual lease payments-38,000 The lease is a 4 year non-cancelable le Lease payments are payable Janzary 1 each year Aztec Inc assumes all coats and ziaks of ownexship ase beginning on 1/1/17 ncluding the fact that it quarantees the residual valse The lease contains no reneval or bargain purchase option, and the press reverts to Darien Cospany at the end of The asset has an estimated economic life of 6 years Both companies depreciate assets using the straight-line method. Darien s implicit rate is 121 (stated in the lease agreement Aztec signed)The Aztec's incremental borrowing rate is 15 Both companies have a December 31 fiscal year-end of the lease payments is reasonably assured& there are no uncertainties about costs for the lessor .t the end of the lease, the actual value of the equipment is $2,500 REQUIRED 1. Confirm/demonstrate how the lessor deternined the ann use inctemental barxcseing rale bectaese it is larer nel 4 Reriadls 2 facker 3.25 323 2. What type of Lease is this for the lessee? Explain why sc Aztec assumes all 32pou 24,?1 44.47%, 75% l.fe a0% of cest l,o 09 Saletypa-lease o 29,121 32. -4 problem 3 (45 pointa) on 1/1/17, Darien Company o Aztec Inc (Hessee) Terms of the agreenent Lessor) leased a new digital printing pres Intormation appear below. and other relevant At 1/1/2017: Fair market value of press- $29,121 (sase as Book Value) ected Residuat value of PreSS E lease end -3000 nual lease payments-38,000 The lease is a 4 year non-cancelable le Lease payments are payable Janzary 1 each year Aztec Inc assumes all coats and ziaks of ownexship ase beginning on 1/1/17 ncluding the fact that it quarantees the residual valse The lease contains no reneval or bargain purchase option, and the press reverts to Darien Cospany at the end of The asset has an estimated economic life of 6 years Both companies depreciate assets using the straight-line method. Darien s implicit rate is 121 (stated in the lease agreement Aztec signed)The Aztec's incremental borrowing rate is 15 Both companies have a December 31 fiscal year-end of the lease payments is reasonably assured& there are no uncertainties about costs for the lessor .t the end of the lease, the actual value of the equipment is $2,500 REQUIRED 1. Confirm/demonstrate how the lessor deternined the ann use inctemental barxcseing rale bectaese it is larer nel 4 Reriadls 2 facker 3.25 323 2. What type of Lease is this for the lessee? Explain why sc Aztec assumes all 32pou 24,?1 44.47%, 75% l.fe a0% of cest l,o 09 Saletypa-lease o 29,121 32. -4
