In: Accounting
Financial Statement Reporting for a Finance Lease
Reynolds Construction (RC) needs a piece of equipment that costs $120,000. The equipment has an economic life of 3 years and no residual value. The equipment will not require maintenance because its useful life is so short. RC can borrow the full cost of the equipment at an interest rate of 6% with payments due at the end of the year. Alternatively, RC can lease the equipment for $45,000 with payments due at the end of the year. Assume RC chooses the lease, which is a finance lease for financial reporting purposes. Answer the following questions. (Hint: See Table 19-1.)
$_____
$ _____
$ _____
$ _____
$ ______
$______