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The following facts pertain to a non cancelable lease agreement between Faldo Leasing Comp

 
The following facts pertain to a non cancelable lease agreement between Faldo Leasing Company and Vance Company, a lessee.
 
Inception date-----------------------------------------------------------------------January1, 2010
 
Annual lease payment due at the beginning of each year begin-
 
ning with January 1,2010-------------------------------------------------------------------124,798
 
Residual value of equipment at end of lease term, guaranteed by the lessee-------------------  50,000
 
Leaseterm-----------------------------------------------------------------------------------6years
 
Economic life of leased equipment------------------------------------------------------------6yea
rs
Fair value of asset at January 1,2010--------------------------------------------------------600,000
 
Lessor's implicitrate-----------------------------------------------------------------------------12%
 
Lessee's incremental borrowing rate--------------------------------------------------------------12%
 
The lessee assumes responsibility for all executory costs, which are expected to amount to 5,000 per year. The asset will revert to the lessor at the end of the lease term. The lessee hasguaranteed the lessor a residual value of 50,000. The lessee usesthe straight-line depreciation method for all equipment.
 
Instuctions: (Round all numbers to the nearest cent.)
 
(a.) Prepare an amortization schedule that woould be suitable for the lessee for the lease term.
 
(b.) Prepare all of the journal entries for the lessee for 2010 and 2011 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume thelessee's annual accounting period ends on December 31 and reversing entries are used when appropriate.

May 10 2018 View more View Less

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