In: Accounting
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. |