35 part c The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pina Company, a lessee. Commencement date   January 1,   Annual lease payment due at the beginning of    each year, beginning with January 1,   $104,218   Residual value of equipment at end of lease term,    guaranteed by the lessee   $51,000   Expected residual value of equipment at end of lease term   $46,000   Lease term   6 years Economic life of leased equipment   6

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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35 part c

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

Commencement date   January 1,  
Annual lease payment due at the beginning of
   each year, beginning with January 1,
  $104,218  
Residual value of equipment at end of lease term,
   guaranteed by the lessee
  $51,000  
Expected residual value of equipment at end of lease term   $46,000  
Lease term   6 years
Economic life of leased equipment   6 years
Fair value of asset at January 1,   $540,000  
Lessor’s implicit rate   9 %
Lessee’s incremental borrowing rate   9 %


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.

 

(c)

 
 
Suppose Pina received a lease incentive of $5,000 from Faldo Leasing to enter the lease. How would the initial measurement of the lease liability and right-of-use asset be affected?

Right-of-use asset   $enter a dollar amount 
Lease Liability   $enter a dollar amount 


What if Pina prepaid rent of $5,000 to Faldo?

Right-of-use asset   $enter a dollar amount 
Lease Liability   $enter a dollar amount 
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