FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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ompany signs an agreement on January 1, 2020, to lease equipment to Plote Company. The following information
relates to this agreement.
1.
2
3.
4.
5.
6.
The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5
years.
The fair value of the asset at January 1, 2020, is $80,000.
The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of
$7,000, none of which is guaranteed.
The agreement requires equal annual rental payments of $25,563 to the lessor, beginning on January 1, 2020.
The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee.
Plote uses the straight-line depreciation method for all equipment.
Click here to view factor tables.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
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Transcribed Image Text:ompany signs an agreement on January 1, 2020, to lease equipment to Plote Company. The following information relates to this agreement. 1. 2 3. 4. 5. 6. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2020, is $80,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, none of which is guaranteed. The agreement requires equal annual rental payments of $25,563 to the lessor, beginning on January 1, 2020. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. Plote uses the straight-line depreciation method for all equipment. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to O decimal places, e.g.
5,265)
Date
1/1/20
1/1/20
1/1/21
1/1/22
$
Annual Lease
Payment
25563
25563
25563
76689
$
PLOTE COMPANY (Lessee)
Lease Amortization Schedule
Interest on
Liability
0
1929
983
2912
$
Reduction of Lease
Liability
25563
23634
24580
73777
Lease Lial
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Transcribed Image Text:Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to O decimal places, e.g. 5,265) Date 1/1/20 1/1/20 1/1/21 1/1/22 $ Annual Lease Payment 25563 25563 25563 76689 $ PLOTE COMPANY (Lessee) Lease Amortization Schedule Interest on Liability 0 1929 983 2912 $ Reduction of Lease Liability 25563 23634 24580 73777 Lease Lial
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