S and 200 Part III. (38 points) Leases Piper Corp. is a manufacturer of truck trailers. On January 1,2008, Piper Corp. (essor) leases ten trailers to Runyan Company (lessee) under a six-year noncancelable lease agreement. The following information about the lease and the trailers is provided: The agreement requires equal rental payments of $$2,407 beginning on December 31 2008 with a residual value of $60,000 guaranteed by the lessee at the lease end. The payments provide Piper Corp. with a 6% implicit interest rate which is also known to Runyan. Runyan's incremental borrowing rate is l0% per year. 1. e the j The fair value of ten trailers is $300,000. The cost of ten trailers to Piper Corp.i 260,000 Each trailer has an expected useful life of nine years with zero salvage value Use the straight-line method for depreciation 2. Collectibility of the lease payments is reasonably predictable and there are no important uncertainties surrounding the amount of costs yet to be incurred by Piper Corp 3. TWO Required: Based on this information answer the following questions in the spaces provided. Please show all computations and round amounts to the nearest dollar ansactio e Piper C (6 points) Prepare all entries Runyan Co. would make with respect to the lease obligation and leased asset on December 31, 2008. 3. (4 points) What kind of lease is it for Piper Co.? Why? 4. (4 points) Write the journal entry Piper Co. will make on 1/1/2008. 5. S and 200 Part III. (38 points) Leases Piper Corp. is a manufacturer of truck trailers. On January 1,2008, Piper Corp. (essor) leases ten trailers to Runyan Company (lessee) under a six-year noncancelable lease agreement. The following information about the lease and the trailers is provided: The agreement requires equal rental payments of $$2,407 beginning on December 31 2008 with a residual value of $60,000 guaranteed by the lessee at the lease end. The payments provide Piper Corp. with a 6% implicit interest rate which is also known to Runyan. Runyan's incremental borrowing rate is l0% per year. 1. e the j The fair value of ten trailers is $300,000. The cost of ten trailers to Piper Corp.i 260,000 Each trailer has an expected useful life of nine years with zero salvage value Use the straight-line method for depreciation 2. Collectibility of the lease payments is reasonably predictable and there are no important uncertainties surrounding the amount of costs yet to be incurred by Piper Corp 3. TWO Required: Based on this information answer the following questions in the spaces provided. Please show all computations and round amounts to the nearest dollar ansactio e Piper C (6 points) Prepare all entries Runyan Co. would make with respect to the lease obligation and leased asset on December 31, 2008. 3. (4 points) What kind of lease is it for Piper Co.? Why? 4. (4 points) Write the journal entry Piper Co. will make on 1/1/2008. 5
