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In: Accounting

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

Solutions

Expert Solution

ekkarill92 answered 2 years ago
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