Question

The following facts pertain to a non-cancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee. Commencement date May 1, 2020 Annual lease payment due at the beginning of each year, beginning with May 1, 2020 $20,471.94 Bargain purchase option price at end of lease term $4,000 Lease term 5 years Economic life of leased equipment 10 years Lessor’s cost $65,000 Fair value of asset at May 1, 2020 $91,000 Lessor’s implicit rate 8 % Lessee’s incremental borrowing rate 8 % The collectibility of the lease payments by Mooney is probable. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Correct answer iconYour answer is correct. Discuss the nature of this lease to Rode. The nature of this lease to Rode is a lease. eTextbook and Media List of Accounts Attempts: 1 of 5 used (b) Correct answer iconYour answer is correct. Discuss the nature of this lease to Mooney. The nature of this lease to Mooney is a lease. eTextbook and Media List of Accounts Attempts: 3 of 5 used (c) Prepare a lease amortization schedule for Rode for the 5-year lease term. (Round answers to 2 decimal places, e.g. 5,275.15.) RODE COMPANY (Lessee) Lease Amortization Schedule Date Annual Lease Payment Plus BPO Interest on Liability Reduction of Lease Liability Lease Liability 5/1/20 $ $ $ $ 5/1/20 5/1/21 5/1/22 5/1/23 5/1/24 4/30/25 $ $ $ eTextbook and Media List of Accounts Attempts: 0 of 5 used?

Answer 1

a.)	The lease is a finance lease for Rode Company.
b.)	The lease is a finance lease for Mooney Leasing Company.
c.)	Lease amotization Schedule for Rode Company:-
	Date	Annual Lease Payment Plus BPO	Interest on Liability	Reduction of lease liability	Lease Liability
	May 1, 2020	-	-	-	91,000
	May 1, 2020	20,471.94	-	20,471.94	70,528.06
	May 1, 2021	20,471.94	5,642.24	14,829.70	55,698.36
	May 1, 2022	20,471.94	4,455.87	16,016.07	39,682.29
	May 1, 2023	20,471.94	3,174.58	17,297.36	22,384.94
	May 1, 2024	20,471.94	1,790.80	18,681.14	3,703.79
	April 30,2025	4,000.00	296.30	3,703.80	-0.00
	Total	106,359.70	15,359.80	91,000.00
	Working:-
	Date	Lease Payment	PV factor @8%	Present Value
	May 1, 2020	20,471.94	1	20,472
	May 1, 2021	20,471.94	0.926	18,957
	May 1, 2022	20,471.94	0.857	17,544
	May 1, 2023	20,471.94	0.794	16,255
	May 1, 2024	20,471.94	0.735	15,047
	April 30,2025	4,000.00	0.681	2,725
	Total	106,359.70		91,000