Question
Timmy Incorporated leases a piece of equipment to Apple Corporation on January 1, 2017. 1. Lease term in years. 4 2. Fair Value of equipment
Timmy Incorporated leases a piece of equipment to Apple Corporation on January 1, 2017.
1. Lease term in years. 4
2. Fair Value of equipment 25,100
3. Book Value of equipment 20,100
4. Lease agreement requires equal annual lease payments, beginning on January 1, 2017 $4,952
Assume accounting periods ends December 31.
5. Estimated economic life of the equipment in years 6
Unguaranteed Residual Value at end of lease term $8100
Expected Residual Value at end of lease term. $8100
6. Lessor and Lessee use straight-line depreciation for all assets.
7. Apple incremental rate of interest. 8%
Timmy implicit rate of interest ( Known to Apple) 5%
8. 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.
What if this lease was only for one year with no expectation of the asset being transferred to the lessee? Provide the journal entries from the lessor's perspective only.
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