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Question 4: (13 marks) Ahemka Corporation is a manufacturer of medical equipment's. On January 1, 2010, Ahemka Corporation leases electronic equipment to Eagle Company. The
Question 4: (13 marks) Ahemka Corporation is a manufacturer of medical equipment's. On January 1, 2010, Ahemka Corporation leases electronic equipment to Eagle Company. The following information about the lease and the equipment is provided: The term of the non-cancelable lease is 5 years. The agreement requires equal rental payments of 250 per year at the beginning of each year. . The fair value of the equipment on January 1, 2010 is 1000. The equipment has an estimated economic life of 6 years, and no residual value. The yearly rental payment includes 30 of executory costs related to insurance on the equipment. The incremental borrowing rate of Ahemka Corporation is 8% a year. Required Calculate the present value of the minimum lease payments? (1 marks) b. Discuss the type of the lease arrangement to Eagle Company? (1+1=2 marks) Construct an amortization schedule for the lease term. (3 marks) Prepare all of the necessary journal entries for Eagle Company, the lessee, for 2010 and 2011, including the lease agreement, the lease payments, and all expenses associated with this lease arrangement (7 marks: each entry 1 mark)
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