The following facts pertain to a non-cancelable lease agreement between Lennox Leasing Company and Gill Company, a lessee.

The lessee assumes responsibility for all executory costs.
Instructions (Round all numbers to the nearest cent.)

(a) Discuss the nature of this lease to Gill Company.

(b) Discuss the nature of this lease to Lennox Company

(c) Prepare a lease amortization schedule for Gill Company for the 5-year lease term.

(d) Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2015 and 2016. Gill’s annual

Transcribed Image Text:

Inception date: Annual lease payment due at the beginning of each year, beginning with May 1, 2015 Bargain-purchase option price at end of lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at May 1, 2015 Lessor's Implicit rate Lessee's Incremental borrowing rate May 1, 2015 18,829.49 4,000.00 5 years 10 years 65,000.00 81,000.00 10% 10%