Question

Exercise 21A-5 a-c Tamarisk Leasing Company signs an agreement on January 1, 2017, to lease equipment to Cole Company. The following information relates to this agreement 1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an 2. The cost of the asset to the lessor is $291,000. The fair value of the asset at January 1, 2017, is 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to 4. The agreement requires equal annual rental payments, beginning on January 1, 2017 estimated economic life of 6 years. $291,000. have a residual value of $29,100, none of which is guaranteed Collectibility of the lease payments by Tamarisk is probable. 5. Click here to view the factor table Assuming the lessor desires a 8% rate of return on its investment, calculate the amount of the annual rental payment required. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and the final answer to 0 decimal places e.g. 5,275.) Amount of the annual rental payment SHOW LIST OF ACCOUNTS LINK TO TEXTLINK TO TEXT

Answer 1

FMV = (Rent x factor) + (Residual value x factor)

291000 = Rent * 4.99271 PVIFA(8% , 0-5 years) + 29100 * 0.63017 PVF (8%,6^th year)

291000 - 18337.94 = Rent * 4.99271

Rent = 54612.

TAMARISK LEASING COMPANY (Lessor)
Lease amortization schedule
Date	Annual lease payment plus URV	Interest (8%) on lease receivable	recovery of lease receivable	Lease receivable
January 1, 2017				291000
January 1, 2017	54612	0	54612	236388
January 1, 2018	54612	18911	35701	200687
January 1, 2019	54612	16055	38557	162130
January 1, 2020	54612	12970	41642	120488
January 1, 2021	54612	9639	44973	75515
January 1, 2022	54612	6041	48571	26944
December 31, 2022	29100	2156	26944	0
	356772	65772	291000

Date	Account titles and Explanation	Debit	Credit
1/1/17	Lease Receivable	291000
	Equipment		291000
1/1/17	Cash	54612
	Lease Receivable		54612
12/31/17	Interest Receivable	18911
	Interest revenue		18911
1/1/18	Cash	54612
	Lease Receivable		35701
	Interest Receivable		18911
12/31/18	Interest Receivable	16055
	Interest revenue		16055