Question
In: Accounting
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.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
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Pharoah Leasing Company leases a new machine to Sharrer
Corporation. The machine has a cost of $65,000 and fair value of
$93,000. Under the 3-year, non-cancelable contract, Sharrer will
receive title to the machine at the end of the lease. The machine
has a 3-year useful life and no residual value. The lease was
signed on January 1, 2020. Pharoah expects to earn an 8% return on
its investment, and this implicit rate is known by Sharrer. The
annual rentals...
Oriole Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of...
Oriole Leasing Company leases a new machine to Sharrer
Corporation. The machine has a cost of $65,000 and fair value of
$87,000. Under the 3-year, non-cancelable contract, Sharrer will
receive title to the machine at the end of the lease. The machine
has a 3-year useful life and no residual value. The lease was
signed on January 1, 2020. Oriole expects to earn an 8% return on
its investment, and this implicit rate is known by Sharrer. The
annual rentals...
Crane Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of...
Crane Leasing Company leases a new machine to Sharrer
Corporation. The machine has a cost of $65,000 and fair value of
$96,500. Under the 3-year, non-cancelable contract, Sharrer will
receive title to the machine at the end of the lease. The machine
has a 3-year useful life and no residual value. The lease was
signed on January 1, 2020. Crane expects to earn an 8% return on
its investment, and this implicit rate is known by Sharrer. The
annual rentals...
Sunland Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of...
Sunland Leasing Company leases a new machine to Sharrer
Corporation. The machine has a cost of $65,000 and fair value of
$88,500. Under the 3-year, non-cancelable contract, Sharrer will
receive title to the machine at the end of the lease. The machine
has a 3-year useful life and no residual value. The lease was
signed on January 1, 2020. Sunland expects to earn an 8% return on
its investment, and this implicit rate is known by Sharrer. The
annual rentals...
Blossom Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of...
Blossom Leasing Company leases a new machine to Sharrer
Corporation. The machine has a cost of $65,000 and fair value of
$90,500. Under the 3-year, non-cancelable contract, Sharrer will
receive title to the machine at the end of the lease. The machine
has a 3-year useful life and no residual value. The lease was
signed on January 1, 2020. Blossom expects to earn an 8% return on
its investment, and this implicit rate is known by Sharrer. The
annual rentals...
Cullumber Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of...
Cullumber Leasing Company leases a new machine to Sharrer
Corporation. The machine has a cost of $65,000 and fair value of
$86,000. Under the 3-year, non-cancelable contract, Sharrer will
receive title to the machine at the end of the lease. The machine
has a 3-year useful life and no residual value. The lease was
signed on January 1, 2020. Cullumber expects to earn an 8% return
on its investment, and this implicit rate is known by Sharrer. The
annual rentals...
Crane Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of...
Crane Leasing Company leases a new machine to Sharrer
Corporation. The machine has a cost of $65,000 and fair value of
$91,000. Under the 3-year, non-cancelable contract, Sharrer will
receive title to the machine at the end of the lease. The machine
has a 3-year useful life and no residual value. The lease was
signed on January 1, 2017. Crane expects to earn an 8% return on
its investment, and this implicit rate is known by Sharrer. The
annual rentals...
Macinski Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of...
Macinski Leasing Company leases a new machine to Sharrer
Corporation. The machine has a cost of $70,000 and fair value of
$95,000. Under the 3-year, non-cancelable contract, Sharrer will
receive title to the machine at the end of the lease. The machine
has a 3-year useful life and no residual value. The lease was
signed on January 1, 2020. Macinski expects to earn an 8% return on
its investment, and this implicit rate is known by Sharrer. The
annual rentals...
Carla Vista Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost...
Carla Vista Leasing Company leases a new machine to Sharrer
Corporation. The machine has a cost of $65,000 and fair value of
$89,000. Under the 3-year, non-cancelable contract, Sharrer will
receive title to the machine at the end of the lease. The machine
has a 3-year useful life and no residual value. The lease was
signed on January 1, 2020. Carla Vista expects to earn an 8% return
on its investment, and this implicit rate is known by Sharrer. The...
Exercise 21-07 b-e Blossom Leasing Company leases a new machine to Sharrer Corporation. The machine has...
Exercise 21-07 b-e
Blossom Leasing Company leases a new machine to Sharrer
Corporation. The machine has a cost of $65,000 and fair value of
$85,000. Under the 3-year, non-cancelable contract, Sharrer will
receive title to the machine at the end of the lease. The machine
has a 3-year useful life and no residual value. The lease was
signed on January 1, 2020. Blossom expects to earn an 8% return on
its investment, and this implicit rate is known by Sharrer....
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