Question

Problem 21A-1 a-c (Part Level Submission)
The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Sweet Company, a lessee.

Commencement date       January 1, 2017  
Annual lease payment due at the beginning of
each year, beginning with January 1, 2017       $104,738  
Residual value of equipment at end of lease term,
guaranteed by the lessee       $54,000  
Expected residual value of equipment at end of lease term       $49,000  
Lease term       6   years
Economic life of leased equipment       6   years
Fair value of asset at January 1, 2017       $584,000  
Lessor’s implicit rate       6   %
Lessee’s incremental borrowing rate       6   %

The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.

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Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places e.g. 5,275.)

SWEET COMPANY (Lessee) Lease Amortization Schedule Annual Lease Reduction of Lease Liability Interest on Date Payment Plus GRV Liability Lease Liability 584000 104738 104738 479262 104738 28756 75982 403280 104738 24197 80541 322739 1/1/20 104738 19364 85374 237365 1/1/21 104738 14242 90496 146869 1/1/22 104738 8812 95926 50943 12/31/22 53,999 3057 50943 682427 98428 584000

Answer 1

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