
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January 1, 2019. The lease terms, provisions, and related events are as follows:
1. | The lease term is 5 years. The lease is noncancelable and requires annual rental receipts of $100,000 to be made in advance at the beginning of each year. |
2. | The equipment costs $313,000. The equipment has an estimated life of 6 years and, at the end of the lease term, has a residual value of $20,000 which is guaranteed by Davis Company (the lessee). |
3. | Davis agrees to pay all executory costs directly to a third party. |
4. | The interest rate implicit in the lease is 14%. |
5. | The initial direct costs are insignificant and assumed to be zero. |
6. | It is probable that Edom will collect the lease payments. |
Required:
1. | Next Level Assuming that the lease is a sales-type lease, calculate the selling price. |
2. | Prepare a table summarizing the lease receipts and interest income earned by Edom. |
3. | Prepare |
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