Question: Comprehensive lease exercise: On Dec 3 1 , 2 0 2 1 , YAL leased a delivery truck from BMotor. BMotor paid $ 4 0

Comprehensive lease exercise: On Dec 31,2021, YAL leased a delivery truck from BMotor.
BMotor paid $40,000 for the truck. Its retail value is $45,114. Annual lease payment is $11,000
beginning Dec 31,2021, and at each Dec. 31 through 2024. BMotor implicit interest rate is 10%.
At the end of the four-year lease term (Dec 31.2025) the truck is expected to be worth $15,000.
The estimated useful life of the truck is five years with no salvage value. Both companies use
straight-line depreciation. YAL guarantees a residual value of $6,000. YALs borrowing rate is 9%
and is unaware of BMotors implicit rate. A $1,000 per year maintenance agreement was
arranged for the truck with an outside service firm. BMotor agrees to pay this fee. It is however
reflected in the $11,000 lease payments

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