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Morgan Leasing Company signs an agreement on January 1, 2017, to lease equipment to Cole Company....

Morgan Leasing Company signs an agreement on January 1, 2017, to lease equipment to Cole Company. The following information relates to this agreement.

1

The term of the noncancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years

2

The cost of the asset to the lessor is $245,000. The fair value of the asset at January 1, 2017, is $245,000.

3

The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value

of $43,622, none of which is guaranteed.

4

Cole Company assumes direct responsibility for all executory cost

5

The agreement requires equal annual rental payments, beginning on January 1, 2017

6

Collectibility of the lease payments is reasonably predictable. There are no important uncertainties surrounding the

amount of costs yet to be incurred by the lessor

Assuming the lessor desires a 10% rate of return on its investments, the annual rental payments should be $28,867.

Question: Prepare an amortization schedule that would be suitable for the lessor for the lease term.

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