15 Feb Lessee Oscar and lessor Susan on January 1, 2019, entered into a 6-year non-cancelable lease for equipment having a useful life of 12 years. Lessee’s incremental borrowing rate is
Problem IV: Lessee Oscar and lessor Susan on January 1, 2019, entered into a 6-year non-cancelable lease
for equipment having a useful life of 12 years.
Lessee’s incremental borrowing rate is 10% while lessor’s implicit rate is 9% and known to lessee.
Lessee and lessor both uses the straight-line method of depreciation. The lease contains the following provisions:
Annual rental payments of $30,000 payable at the beginning of each year, starting January 1, 2019.
There is a guaranteed residual value at the end of the lease for $25,000.
The equipment has a cost of $160,000 and fair value of $170,000.
Collectability of lease payments is probable.
INSTRUCTIONS
(a) What kind of lease is this to the lessee and the lessor?
(b) Prepare the journal entries on the books of the lessee and the lessee and the lessor through December 31, 2024.
(c) What if the residual value is unguaranteed?
(d) What if there is a bargain purchase option of $25,000 at the end of the lease?
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.