Question

Larkspur Corporation leases a building to Crane, Inc. on January 1, 2020. The following facts pertain to the lease agreement 1 The lease term is 10 years with equal annual rental payments of $3.579 at the end of each year. 2 Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature 3. The building has a fair value of $33.100, a book value to Larkspur of $21.000, and a useful life of 15 years 4. At the end of the lease term Larkspur and Crane expect the residual value of the building to be $12, 100, and this amount is guaranteed by Money, Inc, a third party 5. Larkspur wants to earn a 6x return on the lease, and collectibility of the payments is probable Click here to view factor tables For calculation purposes se decimal places as displayed in the factor table provided) Your answer is correct Determine the nature of this lease to both Larkspur and Crane The lease is aan Sranding and to Larkspur The leis an erre to Crane the present a nts and third party guarantees 32.100 and the rate of return to amortizethet hatlease receivable to zero Round answers to dedmal places eg 5,275) t o 1495Preparamos LARKSPUR CORPORATION Lessor) Lease Amortization Schedule Sales-Type Lease Interest on Recovery of Lease Receivable Les Receivable Annual Lease Pant Date L eccable

Answer 1

Lease Amortization Schedule
Date	Annual Lease Payment	Interest on Lease Receivable	Recovery of Lease Receivable	Lease Receivable
1/1/2020	(A)	(Lease receivable * 6%) (B)	(A-B)	$          33,100
12/31/2020	$                3,579	$                 1,986	$            1,593	$          31,507
12/31/2021	$                3,579	$                 1,890	$            1,689	$          29,818
12/31/2022	$                3,579	$                 1,789	$            1,790	$          28,029
12/31/2023	$                3,579	$                 1,682	$            1,897	$          26,131
12/31/2024	$                3,579	$                 1,568	$            2,011	$          24,120
12/31/2025	$                3,579	$                 1,447	$            2,132	$          21,988
12/31/2026	$                3,579	$                 1,319	$            2,260	$          19,729
12/31/2027	$                3,579	$                 1,184	$            2,395	$          17,333
12/31/2028	$                3,579	$                 1,040	$            2,539	$          14,794
12/31/2029	$                3,579	$                    888	$            2,691	$          12,103
12/31/2030	$                3,579	$                    726	$            2,853	$            9,250