Question
In: Accounting
Calculation of lease payments Zest Company, as lessee, enters into a lease agreement on January 1,...
Calculation of lease payments
Zest Company, as lessee, enters into a lease agreement on January
1, 2018, to
lease equipment. The following data are relevant to the lease
agreement.
- The term of the noncancellable lease is three years, with no
renewal option.
- The fair value of the equipment on January 1, 2018 is $60,000.
The
estimated residual value is $0.
- The equipment reverts back to the lessor at the termination of
the lease.
- The lessor used an implicit rate of 4%.
Instructions:
-Calculate the required amount of the lease payments
(Present Value & Future Value Tables are provided on pages 3
and 4)
Solutions
Expert Solution
Note
Lease payment should be that, that it's discounted cash flows at lessors implicit rate covers it's fair value - salvage if any
If you have any queries kindly post a comment, i will solve it earliest.
If you satisfied with my answer, kindly give a thumbs up, it will help to encourage me.
ekkarill92 answered 2 years agoRelated Solutions
Jay Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment....
Jay Company, as lessee, enters into a lease agreement on January
1, 2020, to lease equipment. The following data are relevant to the
lease agreement.
- The term of the noncancellable lease is three years, with no
renewal option. Payments of $12,000 are due on January 1, of each
year.
- The fair value of the equipment on January 1, 2020 is $35,000.
The equipment has an estimated economic life of five years, and an
unguarenteed residual value of $4,000....
Jay Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment....
Jay Company, as lessee, enters into a lease agreement on January
1, 2020, to lease equipment. The following data are relevant to the
lease agreement.
- The term of the noncancellable lease is three years, with no
renewal option. Payments of $12,000 are due on January 1, of each
year.
- The fair value of the equipment on January 1, 2020 is $35,000.
The equipment has an estimated economic life of five years, and an
unguarenteed residual value of $4,000....
I NEED CALCULATION/PROCESSES TO UNDERSTAND IT. Company A, as lessee, enters into a lease agreement on...
I NEED CALCULATION/PROCESSES TO UNDERSTAND
IT.
Company A, as lessee, enters into a lease agreement on January
1, 2017, for equipment. The following data are relevant to the
lease agreement:
1. The term of the
noncancelable lease is 4 years, with no renewal option. Payments of
$845,378 are due on January 1 of each year.
2. The fair value of the
equipment on January 1, 2017 is $3,200,000. The equipment has an
economic life of 6 years with an unguaranteed...
Falwell Company, as lessee, enters into a lease agreement on January 1, 2018, for equipment. The...
Falwell Company, as lessee, enters
into a lease agreement on January 1, 2018, for equipment. The
following data are relevant to the lease agreement:
1. The term of
the noncancelable lease is 4 years. Payments of $4,892 are due on
January 1 of each year.
2. The fair
value of the equipment on January 1, 2018 is $25,000 and the book
value is 20,000. The equipment has an economic life of 6 years.
Both parties expect the equipment to have an unguaranteed...
Cullumber Company, as lessee, enters into a lease agreement on July 1, 2021, for equipment. The...
Cullumber Company, as lessee, enters into a lease agreement on
July 1, 2021, for equipment. The following data are relevant to the
lease agreement:
1.
The term of the noncancelable lease is 4 years, with
no renewal option. Payments of $855,212 are due on
July 1 of each year.
2.
The fair value of the equipment on July 1, 2021 is $3,020,000.
The equipment has an economic life of 6 years with
no salvage value.
3.
Cullumber depreciates similar machinery...
Sky Mountain, as lessee, enters into a lease agreement on May 1, 2020, for an Animal...
Sky Mountain, as lessee, enters into a lease agreement on May 1,
2020, for an Animal Outfit with Outfit Inc. The following data are
relevant to the lease agreement:
The term of the noncancelable lease is 10 years, with no
renewal option. Payments of $140,000 are due at the beginning of
each year, starting today.
The fair value of the outfit is $1,000,000 (a quite unique
costume). The outfit has an economic life of 13 years with no
salvage value....
Tony Tiger, as lessee, enters into a lease agreement on May 1, 2020, for a tiger...
Tony Tiger, as lessee, enters into a lease agreement on
May 1, 2020, for a tiger costume with Costume Inc. The following
data are relevant to the lease agreement:
The term of the noncancelable lease is 10 years, with no
renewal option. Payments of $138,990 are due at the beginning of
each year, starting today.
The fair value of the costume is $1,000,000 (it’s a pretty
unique costume). The costume has an economic life of 13 years with
no salvage...
A Lessee enters into a 3-year lease contract to lease a computer with annual lease payments...
A Lessee enters into a 3-year lease contract to lease a computer
with annual lease payments of $10,000 to be paid at the ending of
each year. Lessee's borrowing rate is 10%. Answer each question
independently. Assume a straight line depreciation method to
calculate depreciation expense.
Present value of an ordinary annuity of $1: PVF-OA (3,10%) =
2.48685
A) If this is classified as a capital lease, compute interest
expense and depreciation expense that the lessee should recognize
in the...
Lessee enters into a three-year lease of equipment and concludes that the agreement is a finance...
Lessee enters into a three-year lease of equipment and concludes
that the agreement is a finance lease because the lease term is for
a major part of the remaining economic life of the underlying asset
(also three years). In addition, Lessee pays initial direct costs
of $3,000. Also, assume that Lessee has guaranteed the residual
value of the equipment at the end of the lease term, has concluded
that it is probable that Lessee will owe $6,000 to Lessor as...
Lessee enters into a three-year lease of equipment and concludes that the agreement is a finance...
Lessee enters into a three-year lease of equipment and concludes
that the agreement is a finance lease because the lease term is for
a major part of the remaining economic life of the underlying asset
(also three years). In addition, Lessee pays initial direct costs
of $3,000. Also, assume that Lessee has guaranteed the residual
value of the equipment at the end of the lease term, has concluded
that it is probable that Lessee will owe $6,000 to Lessor as...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- (2) Cite an example on how organizations like Google, Facebook, Youtube etc collect data for image...
- The legal landscape is perpetually changing. Psychologists must remain abreast of these changes to avoid potentially...
- We are evaluating a project that costs $1.68 million, has a six-year life, and has no...
- In C++ Having call-by-reference allows one to use storeback parameters, i.e., parameters whose values are transmitted...
- You must evaluate a proposal to buy a new milling machine. The base price is $175,000,...
- “Triangle Guessing” game in Python The program accepts the lengths of three (3) sides of a...
- THIS PROGRAM HAS TO BE WRITTEN IN C Single function to perform the parity computation on...
ADVERTISEMENT