Question: King Cones leased ice cream making equipment from Ace Leasing Ace
King Cones leased ice cream-making equipment from Ace Leasing. Ace earns interest under such arrangements at a 6% annual rate. The lease term is eight months with monthly payments of $10,000 at the end of each month. Ace purchased the equipment having an estimated useful life of four years at a cost of $300,000. Both the lessee and the lessor elected the short-term lease option. Amortization is recorded at the end of each month on a straightline basis. Ace depreciates assets monthly on a straight-line basis. What is the effect of the lease on King Cones’ earnings during the eight-month term, ignoring taxes?
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