FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord $280,000 (useful life is 6 years with no residual value). The fair value the equipment is $300,000. The interest rate implicit in the lease is 14%. The 6-year lease requires 6 equal amounts payable each January 1, beginning with January 1, 2019. Tenant pays all executory costs directly to a third party on December 1 of each year. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs. Lanlord expects to collect all rental payments.
Required:
1. | Next Level Show how Landlord should compute the annual rental amounts. |
2. | Next Level Prepare a table summarizing the lease and interest receipts that would be suitable for Landlord. |
3. | Assuming that the table prepared in Requirement 2 is suitable for both the lessee and the lessor, prepare the |
4. | Next Level Show the items and amounts that would be reported on the comparative 2019 and 2020 income statements and ending |
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