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
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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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?
What if Pina prepaid rent of $5,000 to Faldo?
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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