Truck Leasing Company (TLC) buys trucks for leasing to various delivery companies. On April 1, 2010, TLC leases a truck to Showman Delivery Company. The cost of the truck of $289,875 and its fair value were the same. The lease payments stipulated in the lease are $40,000 per year in advance for the 10-year period of the lease. The expected economic life of the equipment is also 10 years. The title to the equipment remains in the hands of TLC at the end of the lease term, although only nominal residual value is expected at that time. Showman incremental borrowing rate is 5%, and it uses the straight-line method of depreciation on all owned equipment. Both Showman and TLC have fiscal year ending March 31, while lease payments are made on April 1 each year. Required:
a. Determine the rate implicit in the lease
b. Determine the present value of the minimum lease payments for the lessee.
c. Prepare the entries to record the lease and the first lease payment on the books of the lessor and lessee, assuming the lease meets the criteria of a direct financing lease for the lessor and a capital lease for the lessee.
d. Other than those at (c ) above, prepare all entries required to account for the lease on both the lessee’s and lessor’s books for the fiscal year 2011.
Truck Leasing Company (TLC) buys trucks for leasing to various delivery companies. On April 1, 2010,...
Laura Leasing Company signs an agreement on January 1, 2017, to lease equipment to Plote Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2017, is $80,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset...
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Skysong Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2020, is $77,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset...
(b) The information below relates to a leasing arrangement between Simmonds Leasing Company and Telsan Company, a lessee. Inception date January 1, 2020 Lease term 6 years Annual lease payment due at the beginning of each year, beginning with January 1, 2020 $150,000 Fair value of asset at January 1, 2020 $760,000 Economic life of leased equipment 7 years Residual value of equipment at end of lease term, guaranteed by the lessee $65,500 Lessor’s implicit rate 10% Lessee’s incremental borrowing...
(b) The information below relates to a leasing arrangement between Simmonds Leasing Company and Telsan Company, a lessee. Inception date January 1, 2020 Lease term 6 years Annual lease payment due at the beginning of each year, beginning with January 1, 2020 $150,000 Fair value of asset at January 1, 2020 $760,000 Economic life of leased equipment 7 years Residual value of equipment at end of lease term, guaranteed by the lessee $65,500 Lessor’s implicit rate 10% Lessee’s incremental borrowing...
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...
Laura Leasing Company signs an agreement on January 1, 2017, to lease equipment to Crane Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2017, is $49,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset...
Laura Leasing Company signs an agreement on January 1, 2017, to lease equipment to Crane Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2017, is $49,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset...
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Shamrock Company. The following information relates to this agreement. 1.The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2.The fair value of the asset at January 1, 2020, is $55,000. 3.The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to...
E21-11 (L02) (Amortization Schedule and Journal Entries for Lessee) Laura Leasing Company signs an agreement on January 1, 2017, to lease equipment to Plote Company. The following information relates to this agreement. 1. The term of the non cancelable lease is 5 years with no renewal option. The equipment has an estimated economic life of 5years. 2. The fair value of the asset at January 1, 2017, is $80,000. 3. The asset will revert to the lessor at the end...
LeMond Leasing leases equipment to Costigan Construction. The non-cancelable term is 6 years beginning January 1, 20X1, with equal rental payments of $43,162 paid at the beginning of each year. The equipment’s title transfers to Costigan at the end of the lease term. The fair value of the equipment at the inception of the lease is $215,496 and its cost is $180,496. The equipment has a useful life of 7 years. The lessee’s incremental borrowing rate is 10%, and the...