Question

The following facts pertain to a noncancelable lease agreement between Monty Leasing Company and Flounder Company, a lessee.

Inception date:		May 1, 2017
Annual lease payment due at the beginning of
each year, beginning with May 1, 2017		$19,803.59
Bargain-purchase option price at end of lease term		$3,900
Lease term		5	years
Economic life of leased equipment		10	years
Lessor’s cost		$71,000
Fair value of asset at May 1, 2017		$85,000
Lessor’s implicit rate		10	%
Lessee’s incremental borrowing rate		10	%

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.

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(a)

• Your Answer
• Correct Answer

Correct answer iconYour answer is correct.

Compute the amount of the lease receivable at the inception of the lease. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and Round answers to 2 decimal places, e.g. 16.25.)

Lease receivable at inception

$

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Solution

Attempts: 3 of 3 used

(b)

Incorrect answer iconYour answer is incorrect.

Prepare a lease amortization schedule for Monty Leasing Company for the 5-year lease term. (Round answers to 2 decimal places, e.g. 16.25.)

MONTY LEASING COMPANY (Lessor) Lease Amortization Schedule
Date		Annual Lease Payment Plus BPO		Interest on Lease Receivable		Recovery of Lease Receivable		Lease Receivable
5/1/17		$		$		$		$
5/1/17		$		$		$
5/1/18
5/1/19
5/1/20
5/1/21
4/30/22
		$		$		$

Answer 1

Answey Aease eceiable at-the nceftion dhe ase a Computh amount tase poyme x ptetoster nS,1- 10 (1C Amou P.v de Annual teace amu = $19,803. 59X -7,803,59 x-(i loy.)(+to%) lof. = 19,803.59x 4.169865446 eas78 Pvof bargain he ptinbin perca honxpelo nS,10 2.400 X 3,900x s3,900X0.6204a13231 Lease Rectivale t mcipton= pvdannual ar pamy pd bagain pathase optin $8a58248a = $5,000

.Least Teceivoble at naplion-425000 nnual lase Dte Payment pus Bro Heest on Leasc Recoverylease Peccivable xi 1mse Recairable pueivable 25,000 2012 65196.41 19803.59 19.80 3.59 S৭2. ५6 1328 395 19,203 59 65.14.६4 37300.12 su/2019 YG12.34 5191.25 exejrts 19,803.5 1603.58 3330-O12 3545.6 7680 94 3545.44 3)৭০0 354.56 Annual feas C payma ?lu Bfo - 19,803. S9 ase Reeivolle interest on ase Receivablk = tof.x pesious lecoverea se pecivoabk - Annudl ease paant pšus epo -Mteret on uase Reai unlo le Lease eceivable evious tasc Yecivoble lease ecavable