FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Pina Leasing Company agrees to lease equipment to Grouper Corporation on January 1, 2025. The following information relates to
the lease agreement.
1.
2.
3.
4.
5.
6.
The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.
The cost of the machinery is $475,000, and the fair value of the asset on January 1, 2025, is $681,000.
At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Grouper
estimates that the expected residual value at the end of the lease term will be $50,000. Grouper amortizes all of its leased
equipment on a straight-line basis.
The lease agreement requires equal annual rental payments, beginning on January 1, 2025.
The collectibility of the lease payments is probable.
Pina desires a 9% rate of return on its investments. Grouper's incremental borrowing rate is 10%, and the lessor's implicit rate
is unknown.
(Assume the accounting period ends on December 31.)
(c)
Show Transcribed Text
Your answer is correct.
Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g.
1.25124 and the final answer to O decimal places e.g. 58,972.)
Annual rental payment $
eTextbook and Media
List of Accounts
x Your answer is incorrect.
119151
C
Present value of minimum lease payments $
Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the
final answer to O decimal places e.g. 58,972.)
Attempts: 1 of 5 used
612404
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Transcribed Image Text:Pina Leasing Company agrees to lease equipment to Grouper Corporation on January 1, 2025. The following information relates to the lease agreement. 1. 2. 3. 4. 5. 6. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $475,000, and the fair value of the asset on January 1, 2025, is $681,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Grouper estimates that the expected residual value at the end of the lease term will be $50,000. Grouper amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. The collectibility of the lease payments is probable. Pina desires a 9% rate of return on its investments. Grouper's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) (c) Show Transcribed Text Your answer is correct. Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 58,972.) Annual rental payment $ eTextbook and Media List of Accounts x Your answer is incorrect. 119151 C Present value of minimum lease payments $ Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 58,972.) Attempts: 1 of 5 used 612404
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