Blossom Manufacturing Ltd. has signed a lease agreement with Crane Leasing Inc. to lease some specialized manufacturing equipment. The terms of the lease are as follows: The lease is for 5 years commencing January 1,2023. ⚫ Blossom must pay Crane $54,114 on January 1 of each year, beginning in 2023. ⚫ Equipment of this type normally has an economic life of 6 years. . Crane has concluded, based on its review of Blossom's financial statements, that there is no unusual credit risk in this ⚫ situation. Crane will not incur any fur ther costs with regard to this lease. ⚫ Crane purchases this equipment directly from the manufacturer at a cost of $214,026, and normally sells the equipment for $251,626. . Blossom's borrowing rate is 7%. Crane's implied interest rate is 6%, which is known to Blossom at the time of negotiating the lease. ⚫ Blossom uses the straight-line method to depreciate similar equipment. . Both Blossom and Crane have calendar fiscal years (year end December 31), and follow ASPE. Do a lease amortization schedule for this lease. (Round answers to O decimal places, e.g. 5,275.) Answer the red box and show solution. Prepare a lease amortization schedule for this lease. (Round answers to O decimal places, e.g. 5,275.) Date Payment Interest Principal Balance January 1, 2023 237410 January 1, 2023 $ 54114 54114 183296 January 1, 2024 54114 12831 41283 142013 January 1, 2025 54114 9941 44173 97840 January 1, 2026 54114 6849 47265 50575 January 1, 2027 54114 3540 50574 270570 33161 287983
Blossom Manufacturing Ltd. has signed a lease agreement with Crane Leasing Inc. to lease some specialized manufacturing equipment. The terms of the lease are as follows: The lease is for 5 years commencing January 1,2023. ⚫ Blossom must pay Crane $54,114 on January 1 of each year, beginning in 2023. ⚫ Equipment of this type normally has an economic life of 6 years. . Crane has concluded, based on its review of Blossom's financial statements, that there is no unusual credit risk in this ⚫ situation. Crane will not incur any fur ther costs with regard to this lease. ⚫ Crane purchases this equipment directly from the manufacturer at a cost of $214,026, and normally sells the equipment for $251,626. . Blossom's borrowing rate is 7%. Crane's implied interest rate is 6%, which is known to Blossom at the time of negotiating the lease. ⚫ Blossom uses the straight-line method to depreciate similar equipment. . Both Blossom and Crane have calendar fiscal years (year end December 31), and follow ASPE. Do a lease amortization schedule for this lease. (Round answers to O decimal places, e.g. 5,275.) Answer the red box and show solution. Prepare a lease amortization schedule for this lease. (Round answers to O decimal places, e.g. 5,275.) Date Payment Interest Principal Balance January 1, 2023 237410 January 1, 2023 $ 54114 54114 183296 January 1, 2024 54114 12831 41283 142013 January 1, 2025 54114 9941 44173 97840 January 1, 2026 54114 6849 47265 50575 January 1, 2027 54114 3540 50574 270570 33161 287983
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Blossom Manufacturing Ltd. has signed a lease agreement with Crane Leasing Inc. to lease some specialized manufacturing equipment.
The terms of the lease are as follows:
⚫ The lease is for 5 years commencing January 1,2023.
•
⚫ Blossom must pay Crane $54,114 on January 1 of each year, beginning in 2023.
•
•
Equipment of this type normally has an economic life of 6 years.
• Crane has concluded, based on its review of Blossom's financial statements, that there is no unusual credit risk in this
•
situation. Crane will not incur any further costs with regard to this lease.
⚫ Crane purchases this equipment directly from the manufacturer at a cost of $214,026, and normally sells the equipment for $251,626.
•
⚫ Blossom's borrowing rate is 7%. Crane's implied interest rate is 6%, which is known to Blossom at the time of negotiating the lease.
•
•
Blossom uses the straight-line method to depreciate similar equipment.
⚫ Both Blossom and Crane have calendar fiscal years (year end December 31), and follow ASPE.
Do a lease amortization schedule for this lease. (Round answers to 0 decimal places, e.g. 5,275.)
Answer the red box and show solution.
Prepare a lease amortization schedule for this lease. (Round answers to O decimal places, e.g. 5,275.)
Date
Payment
Interest
Principal
Balance
January 1, 2023
237410
January 1, 2023
54114
0
54114
183296
January 1, 2024
54114
12831
41283
142013
January 1, 2025
54114
9941
44173
97840
January 1, 2026
54114
6849
47265
50575
January 1, 2027
54114
3540
50574
270570
33161
287983
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