Question
In: Accounting
Blossom Incorporated leases a piece of machinery to Pina Company on January 1, 2020, under the...
Blossom Incorporated leases a piece of machinery to Pina Company
on January 1, 2020, under the following terms.
| 1. | The lease is to be for 4 years with rental payments of $15,557 to be made at the beginning of each year. | |
| 2. | The machinery’ has a fair value of $81,480, a book value of $60,800, and an economic life of 10 years. | |
| 3. | At the end of the lease term, both parties expect the machinery to have a residual value of $30,400. To protect against a large loss, Blossom requests Pina to guarantee $21,550 of the residual value, which Irving agrees to do. | |
| 4. | The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature. | |
| 5. | The implicit rate is 5%, which is known by Pina. | |
| 6. | Collectibility of the payments is probable. |
Solutions
ekkarill92 answered 2 years agoRelated Solutions
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