In: Accounting
Doris is leasing a truck whose yearly rental is $5,189. The
lease term is 3 years....
- 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
- What type of lease is this? Why?
- Prepare the amortization schedule for the 3 years for the
lessee and the lessor.
- Prepare lessee and lessor journal entries for the three
years.
- Would an unguaranteed residual change your computations? Show
all work