On January 1, 2012, Cole Corporation entered into a 10 year lease agreement. The following summarizes the agreement:

* Payment of the $30,300 are due at inception of the lease (January 1st, 2012) and at each December 31st thereafter--10 payments in all.

* The leased asset has an estimated useful life of 10 years.

* The equipment reverts back to the lessor at the end of the lease.

* The implicit interest rate known by Cole is 9%.

* Cole uses the straight-line depreciation method for similar assets.

* The asset's residual value is $20,000 and is guaranteed by Cole.

Required to to calculate:

(a). What is the fair value of the asset leased?

(b).What would be the asset recorded on Cole Corporations books at inception of the lease? Prepare the journal entry/entries Cole Corporation must enter on January 1, 2012.

(c). Determine the interest expense and depreciation expense associated with the lease for the year ended December 31, 2012.

(d). Record Cole's journal entry/entries on December 31, 2012.

Answer rating: 100% (QA)

Answer Asset has a useful life of 10 years and residual value of USD 20K Depreciation is on straight ... View the full answer