MODULE $12$ GRADED ASSIGNMENT

Question $12$

Linda Leasing Company signs an agreement on January $1,2025,$ to lease equipment to Swifty Company. The following information relates to this agreement.

The term of the non$-$cancelable lease is $3$ years with no renewal option. The equipment has an estimated economic life of $5$ years.

The fair value of the asset at January $1,2025,$ is $$72,000.$

The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $$12,000,$ none of which is guaranteed.

The agreement requires equal annual rental payments of $$21,250\mathrm{.}90$ to the lessor, beginning on January $1,2025.$

The lessee's incremental borrowing rate is $5\%.$ The lessor's implicit rate is $4\%$ and is unknown to the lessee.

Swifty uses the straight$-$line depreciation method for all equipment.

Click here to view factor tables. titles and enter $0$ for the amounts.$)$

Date

Account Titles and Explanation

$$

Debit

Credit

$$

$($To record the lease$)$

$$

$$

$$

$$

$($To record lease liability$)$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$