36........Teal Leasing Company agrees to lease equipment to Flint Corporation on January 1, 2020. The following information relates to the lease agreement.1. The term of the lease is 6 years with no renewal option, and the machinery has an estimated economic life of 8 years.2. The cost of the machinery is $314,000, and the fair value of the asset on January 1, 2020, is $406,000.3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $36,300. Flint estimates that the expected residual value at the end of the lease term will be $36,300. Flint amortizes all of its leased equipment on a straight-line basis.4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020.5. The collectibility of the lease payments is probable.6. Teal desires a 6% rate of return on its investments. Flint’s incremental borrowing rate is 8%, and the lessor’s implicit rate is unknown.(Assume the accounting period ends on December 31 and that neither company uses reversing entries.) f.Suppose Flint expects the residual value at the end of the lease term to be $29,300 but still guarantees a residual of $36,300. Compute the value of the lease liability at lease commencement. the incorrect answer is 387,252. Please help me find the correct answer, thank you

Lease refers to the form of contract by which one party leases its asset to another party in return…

Answered: 2. The cost of the machinery is…

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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36........

Teal Leasing Company agrees to lease equipment to Flint Corporation on January 1, 2020. The following information relates to the lease agreement.

1.		The term of the lease is 6 years with no renewal option, and the machinery has an estimated economic life of 8 years.
2.		The cost of the machinery is $314,000, and the fair value of the asset on January 1, 2020, is $406,000.
3.		At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $36,300. Flint estimates that the expected residual value at the end of the lease term will be $36,300. Flint amortizes all of its leased equipment on a straight-line basis.
4.		The lease agreement requires equal annual rental payments, beginning on January 1, 2020.
5.		The collectibility of the lease payments is probable.
6.		Teal desires a 6% rate of return on its investments. Flint’s incremental borrowing rate is 8%, and the lessor’s implicit rate is unknown.

(Assume the accounting period ends on December 31 and that neither company uses reversing entries.)

Suppose Flint expects the residual value at the end of the lease term to be $29,300 but still guarantees a residual of $36,300. Compute the value of the lease liability at lease commencement.

the incorrect answer is 387,252.

Please help me find the correct answer, thank you

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