4.. new.. Bonita Leasing Company agrees to lease equipment to Windsor Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $559,000, and the fair value of the asset on January 1, 2020, is $724,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Windsor estimates that the expected residual value at the end of the lease term will be 60,000. Windsor amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Bonita desires a 10% rate of return on its investments. Windsor’s incremental borrowing rate is 11%, and the lessor’s implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. (a) Discuss the nature of this lease for both the lessee and the lessor. This is a ? for Windsor. This is a ? for Bonita.
4.. new.. Bonita Leasing Company agrees to lease equipment to Windsor Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $559,000, and the fair value of the asset on January 1, 2020, is $724,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Windsor estimates that the expected residual value at the end of the lease term will be 60,000. Windsor amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Bonita desires a 10% rate of return on its investments. Windsor’s incremental borrowing rate is 11%, and the lessor’s implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. (a) Discuss the nature of this lease for both the lessee and the lessor. This is a ? for Windsor. This is a ? for Bonita.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 2E: Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement...
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4.. new..
Bonita Leasing Company agrees to lease equipment to Windsor Corporation on January 1, 2020. The following information relates to the lease agreement.
(Assume the accounting period ends on December 31.)
Click here to view factor tables.
1. | The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. | |
2. | The cost of the machinery is $559,000, and the fair value of the asset on January 1, 2020, is $724,000. | |
3. | At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Windsor estimates that the expected residual value at the end of the lease term will be 60,000. Windsor amortizes all of its leased equipment on a straight-line basis. | |
4. | The lease agreement requires equal annual rental payments, beginning on January 1, 2020. | |
5. | The collectibility of the lease payments is probable. | |
6. | Bonita desires a 10% rate of |
(Assume the accounting period ends on December 31.)
Click here to view factor tables.
(a)
Discuss the nature of this lease for both the lessee and the lessor.
This is a ? for Windsor.
This is a ? for Bonita.
This is a ? for Windsor.
This is a ? for Bonita.
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