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Doris is leasing a truck whose yearly rental is $5,189. The lease term is 3 years....

  1. Doris is leasing a truck whose yearly rental is $5,189. The lease term is 3 years. The estimated economic life of the truck is 4 years. The fair value of the truck is $20,000. The cost of the truck is $15,000. The guaranteed residual value, expected to be paid, is $7000. The Incremental borrowing rate is 8%. $ 14,443

PV for annual lease payments of $5,189 =                 $ 14,443

PV for guaranteed residual of $7,000 =                      $    5,557

PV Total                                               =                      $   20,000

  1. What type of lease is this? Why?
  2. Prepare the amortization schedule for the 3 years for the lessee and the lessor.
  3. Prepare lessee and lessor journal entries for the three years.
  4. Would an unguaranteed residual change your computations? Show all work

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