Problem AAA Leasing Company leases a new machine that has a cost and a fair value...

Problem

AAA Leasing Company leases a new machine that has a cost and a fair value of S674,000 to GGG Company on a 12-year non-cancelable contact. The machine has a useful life of 15 years and no residual value. The leased was signed on January 1, 2015. The cost of capital is 6%. The annual lease payment is $69,900. There is no transfer of ownership at the end of the lease, but the lessee can purchase the asset for $330. The machine is depreciated on a straight line basis.

The present value of the minimum lease payments is $586,030.69.

a) Is this an operating or capital lease to the lessee? Why?

b) Prepare an amortization schedule for the lessee or annual rent payment.

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Expert Solution

ekkarill92 answered 11 months ago

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