The following facts pertain to a noncancelable lease agreement
between Sandhill Leasing Company and Teal Company, a
lessee.
Inception date: | May 1, 2017 | ||
Annual lease payment due at the beginning of | |||
each year, beginning with May 1, 2017 | $19,373.99 | ||
Bargain-purchase option price at end of lease term | $4,400 | ||
Lease term | 5 | years | |
Economic life of leased equipment | 10 | years | |
Lessor’s cost | $62,000 | ||
Fair value of asset at May 1, 2017 | $85,000 | ||
Lessor’s implicit rate | 9 | % | |
Lessee’s incremental borrowing rate | 9 | % |
The collectibility of the lease payments is reasonably predictable,
and there are no important uncertainties surrounding the costs yet
to be incurred by the lessor. The lessee assumes responsibility for
all executory costs. The expected residual value of the equipment
at the end of 5 (10) years is $12,000 ($0).
Teal Company (Lessee) | ||||
Lease Amortisation Schedule | ||||
Date | Annual Lease Payment + BPO | Interest on liabilities | Reduction in lease liability | Lease Liability |
(A) | (B=D×9%) | (C=A-B) | (D) | |
5/1/17 | $85,000 | |||
5/1/17 | $19,373.99 | - | $19,373.99 | $65,626.01 |
5/1/18 | $19,373.99 | $5,906.34 | $13,467.65 | $52,158.36 |
5/1/19 | $19,373.99 | $4,694.25 | $14,679.74 | $37,478.62 |
5/1/20 | $19,373.99 | $3,373.08 | $16,000.91 | $21,477.71 |
5/1/21 | $19,373.99 | $1,932.99 | $17,441.00 | $4,036.71 |
4/30/22 | $4,400 | $363.30 | $4,036.70 | - |
The following facts pertain to a noncancelable lease agreement between Sandhill Leasing Company and Teal Company,...
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