Yogendran Corp., which uses ASPE, leases a car to Jaimme DeLory on June 1, 2023. The term of the non-cancellable lease is 48 months. The following information is provided about the lease:

1. The lessee is given an option to purchase the automobile at the end of the lease term for $5,000.

2. The automobile’s fair value on June 1, 2023, is $29,500. It is carried in Yogendran’s inventory at $21,200.

3. The car has an economic life of seven years, with a $1,000 residual value at the end of that time. The car’s estimated fair value is $10,000 after four years, $7,000 after five years, and $2,500 after six years.

4. Yogendran wants to earn a 12% rate of return (1% per month) on any financing transactions.

5. Jaimme represents a reasonable credit risk and no future costs are anticipated in relation to this lease.

6. The lease agreement calls for a $1,000 down payment on June 1, 2023, and 48 equal monthly payments on the first of each month, beginning June 1, 2023.

Instructions

a. Determine the amount of the monthly lease payment using 

(1) PV tables, 

(2) A financial calculator, 

(3) Excel functions. Round to the nearest cent.

b. What type of lease is this to Yogendran? Explain.

c. Prepare a lease amortization schedule for the 48-month lease term using Excel. Round to the nearest cent.

d. Prepare the entries that are required, if any, on December 31, 2023, Yogendran’s fiscal year end.

e. How much income will Yogendran report on its 2023 statement of income relative to this lease?

f. What is the net investment in the lease to be reported on the December 31, 2023 statement of financial position? How much is reported in current assets? In non-current assets?