The Lessor is Supreme Asset Management Company (SAMC) and the lessee is Bogue Distributors Limited (BDL). The equipment reverts to SAMC upon expiration of the lease agreement. Three Payments are due to SAMC in the amount of $180,000 per year beginning December 31, 2017. An additional sum of $12,000 is to be paid annually by BDL for insurance. BDL guarantees a $20,000 residual value on December 31, 2019 to SAMC. The leased asset is expected to also have a $20,000 salvage value on December 31, 2019; therefore, the asset should be depreciated down to the $20,000 expected residual value. The lessee's incremental borrowing rate is 14% (and the lessor's implicit rate is 12%). PVIFA 14% | PVIFA 12% Year 1 0.8772 0.8929 Year 2 0.7695 0.7972 Year 3 0.6750 0.7118

The Lessor is Supreme Asset Management Company (SAMC) and the lessee is Bogue Distributors Limited (BDL). The equipment reverts to SAMC upon expiration of the lease agreement. Three Payments are due to SAMC in the amount of $180,000 per year beginning December 31, 2017. An additional sum of $12,000 is to be paid annually by BDL for insurance. BDL guarantees a $20,000 residual value on December 31, 2019 to SAMC. The leased asset is expected to also have a $20,000 salvage value on December 31, 2019; therefore, the asset should be depreciated down to the $20,000 expected residual value. The lessee's incremental borrowing rate is 14% (and the lessor's implicit rate is 12%). PVIFA 14% | PVIFA 12% Year 1 0.8772 0.8929 Year 2 0.7695 0.7972 Year 3 0.6750 0.7118

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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