On January 1, 2020 Lessor Corporation enters into a lease agreement with Lessee Ltd: Annual lease...

  

  

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On January 1, 2020 Lessor Corporation enters into a lease agreement with Lessee Ltd: Annual lease payment due at the beginning of each year, starting Jan 1, 2020 $ 24,324.43 Residual value (guaranteed) at the end of the lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at Jan 1, 2020 Lessor's implicit rate Lessee's incremental borrowing rate $ 15,000.00 6 years 10 years $ 95,000.00 $125,000.00 10% 10% The collectability of the lease payments is reasonably predictable, and there are no important uncertainties about costs that have not yet been jncurred by the lessor. The lessee assumes "responsibility for all executory costs. Both companies use ASPE. Required: a) What type of lease is this to the lessee? Explain and show your work. b) Prepare a lease amortization schedule for the lessee for the first three years of the lease term. c) In the lessee's books, prepare the necessary journal entries to reflect the signing of the lease on Jan 1, 2020. Date Account Debit Credit d) In the lessor's books, prepare the necessary journal entries to reflect the signing of the lease on Jan 1, 2020. Show your work Date Account Debit Credit On January 1, 2020 Lessor Corporation enters into a lease agreement with Lessee Ltd: Annual lease payment due at the beginning of each year, starting Jan 1, 2020 $ 24,324.43 Residual value (guaranteed) at the end of the lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at Jan 1, 2020 Lessor's implicit rate Lessee's incremental borrowing rate $ 15,000.00 6 years 10 years $ 95,000.00 $125,000.00 10% 10% The collectability of the lease payments is reasonably predictable, and there are no important uncertainties about costs that have not yet been jncurred by the lessor. The lessee assumes "responsibility for all executory costs. Both companies use ASPE. Required: a) What type of lease is this to the lessee? Explain and show your work. b) Prepare a lease amortization schedule for the lessee for the first three years of the lease term. c) In the lessee's books, prepare the necessary journal entries to reflect the signing of the lease on Jan 1, 2020. Date Account Debit Credit d) In the lessor's books, prepare the necessary journal entries to reflect the signing of the lease on Jan 1, 2020. Show your work Date Account Debit Credit

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Answers Year PV factor e 10Remarks lo 100000 1 090909 1110 2 082645 090909 110 3 075131 082645 110 4 ... View the full answer