Cheyenne Corporation leased equipment to Sage Hill, Inc. on January 1, 2025. The lease agreement called for annual rental payme of $1,103 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $7,500, a book value of $5,530, and Cheyenne expects a residual value of $5,030 at the end of the lease term. Cheyenne set the lea payments with the intent of earning a 5% return, though Sage Hill is unaware of the rate implicit in the lease and has an incrementa borrowing rate of 7%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, an the asset is not of a specialized nature. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) What is the amount of the rental payments used in the lease agreement? (Round answer to 0 decimal places, e.g. 5,275.)
Cheyenne Corporation leased equipment to Sage Hill, Inc. on January 1, 2025. The lease agreement called for annual rental payme of $1,103 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $7,500, a book value of $5,530, and Cheyenne expects a residual value of $5,030 at the end of the lease term. Cheyenne set the lea payments with the intent of earning a 5% return, though Sage Hill is unaware of the rate implicit in the lease and has an incrementa borrowing rate of 7%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, an the asset is not of a specialized nature. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) What is the amount of the rental payments used in the lease agreement? (Round answer to 0 decimal places, e.g. 5,275.)
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...
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