On January 1, 2019, Lessor Co. signs an 8-year lease with Lessee Co. for equipment with...

  

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On January 1, 2019, Lessor Co. signs an 8-year lease with Lessee Co. for equipment with an estimated useful life of 10 years. Lessee has completed the service or lease analysis and concluded it is a lease. • Lessee paid a commission of $1,850 to an agent to set up the lease. Annual rental payments of $57,600 are to be paid every January 1 starting January 1, 2019. The payments include $1,000 each year for maintenance payments, paid in advance. • The fair market value of the asset at the inception of the lease is $350,000. The asset cost the lessor $200,000 as many assets were purchased into inventory at the same time. • At the end of the lease, the lessor will have a residual value in the asset of $22,000 representing the value remaining for the final years of useful life. The Lessee is not aware of this value and does not guarantee it. • The lease contains no bargain purchase option. The equipment will return to Lessor Co, at the end of the lease. • Both companies use straight-line depreciation for any assets. • Lessee Co.'s incremental borrowing rate is 12%. The rate implicit in the lease is 9% and the Lessee is aware of this interest rate in the lease. Both companies have December 31 year ends. Assuming a finance lease for the Lessor and not including the first cash payment for the lease, what amount should be recorded to Sales for the Lessor? 358,539 341,465 347,498 352,506 350,000 On January 1, 2019, Lessor Co. signs an 8-year lease with Lessee Co. for equipment with an estimated useful life of 10 years. Lessee has completed the service or lease analysis and concluded it is a lease. • Lessee paid a commission of $1,850 to an agent to set up the lease. Annual rental payments of $57,600 are to be paid every January 1 starting January 1, 2019. The payments include $1,000 each year for maintenance payments, paid in advance. • The fair market value of the asset at the inception of the lease is $350,000. The asset cost the lessor $200,000 as many assets were purchased into inventory at the same time. • At the end of the lease, the lessor will have a residual value in the asset of $22,000 representing the value remaining for the final years of useful life. The Lessee is not aware of this value and does not guarantee it. • The lease contains no bargain purchase option. The equipment will return to Lessor Co, at the end of the lease. • Both companies use straight-line depreciation for any assets. • Lessee Co.'s incremental borrowing rate is 12%. The rate implicit in the lease is 9% and the Lessee is aware of this interest rate in the lease. Both companies have December 31 year ends. Assuming a finance lease for the Lessor and not including the first cash payment for the lease, what amount should be recorded to Sales for the Lessor? 358,539 341,465 347,498 352,506 350,000

Answer rating: 100% (QA)

Finance lease Given Fair market value 410000 Cost of the Asset 300000 Lease period 10years Lease pay... View the full answer