Goring Dairy leases its milking equipment from King Finance Company under the following lease terms. 1. The lease term is 10 years, non-cancelable, and requires equal rental payments of $30,000 due at the beginning of each year starting January 1, 2019. 2. The equipment has a fair value at the commencement of the lease (January 1, 2019) of $239,635 and a cost of $180,000 on King Finance's books. It also has an estimated economic life of 15 years and an expected residual value of $5,000, though Goring Dairy has guaranteed a residual value of $10,000 to King Finance. 3. The lease contains no renewal options, and the equipment reverts to King Finance upon termination of the lease. The equipment is not of a specialized use. 4. Goring Dairy's incremental borrowing rate is 6% per year. The implicit rate is also 6%. 5. Goring Dairy depreciates similar equipment that it owns on a straight-line basis.

Goring Dairy leases its milking equipment from King Finance Company under the following lease terms. 1. The lease term is 10 years, non-cancelable, and requires equal rental payments of $30,000 due at the beginning of each year starting January 1, 2019. 2. The equipment has a fair value at the commencement of the lease (January 1, 2019) of $239,635 and a cost of $180,000 on King Finance's books. It also has an estimated economic life of 15 years and an expected residual value of $5,000, though Goring Dairy has guaranteed a residual value of $10,000 to King Finance. 3. The lease contains no renewal options, and the equipment reverts to King Finance upon termination of the lease. The equipment is not of a specialized use. 4. Goring Dairy's incremental borrowing rate is 6% per year. The implicit rate is also 6%. 5. Goring Dairy depreciates similar equipment that it owns on a straight-line basis.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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