Concept explainers
a.
The implicit rate of lease.
Given information:
Lease term is 5 years.
Economic life of equipment is 30 years.
Fair value of the asset is $8,500,000.
Exercise price of option is $5,500,000.
Carrying value of asset is $6,500,000.
Annual lease payments are $983,199 due on Jan/1 each year
b.
The classification of lease for lessor.
Given information:
Lease term is 5 years.
Economic life of equipment is 30 years.
Fair value of the asset is $8,500,000.
Exercise price of option is $5,500,000.
Carrying value of asset is $6,500,000.
Annual lease payments are $983,199 due on Jan/1 each year
c.
To prepare: The
Given information:
Lease term is 5 years.
Economic life of equipment is 30 years.
Fair value of the asset is $8,500,000.
Exercise price of option is $5,500,000.
Carrying value of asset is $6,500,000.
Annual lease payments are $983,199 due on Jan/1 each year
d.
To prepare: The journal entries of sales type lease for lessor up to beginning of second year of lease.
Given information:
Lease term is 5 years.
Economic life of equipment is 30 years.
Fair value of the asset is $8,500,000.
Exercise price of option is $5,500,000.
Carrying value of asset is $6,500,000.
Annual lease payments are $983,199 due on Jan/1 each year
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Intermediate Accounting (2nd Edition)
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- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning