FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Skysong Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement.

1.   The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years.
2.   The cost of the asset to the lessor is $341,000. The fair value of the asset at January 1, 2020, is $341,000.
3.   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 $20,010, none of which is guaranteed.
4.   The agreement requires equal annual rental payments, beginning on January 1, 2020.
5.   Collectibility of the lease payments by Skysong is probable.

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(a)

 
 
Assuming the lessor desires a 8% rate of return on its investment, calculate the amount of the annual rental payment required.
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