Morey Corporation leases a tractor from Equity Leasing with a five-year non-cancelable lease on January 1, 20X1 under the following terms: Five payments of $26,379.74 (a 9% implicit rate, known to Morey) due at the end each year. The payments were calculated based on the fair value (which is also the book value for Equity) of the tractor. The lease is nonrenewable and the tractor reverts to Equity at the end of the lease term.
Morey Corporation leases a tractor from Equity Leasing with a five-year non-cancelable lease on January 1, 20X1 under the following terms: Five payments of $26,379.74 (a 9% implicit rate, known to Morey) due at the end each year. The payments were calculated based on the fair value (which is also the book value for Equity) of the tractor. The lease is nonrenewable and the tractor reverts to Equity at the end of the lease term.
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 6P: Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a...
Related questions
Question
Morey Corporation leases a tractor from Equity Leasing with a five-year non-cancelable lease on January 1, 20X1 under the following terms:
- Five payments of $26,379.74 (a 9% implicit rate, known to Morey) due at the end each year.
- The payments were calculated based on the fair value (which is also the book value for Equity) of the tractor.
- The lease is nonrenewable and the tractor reverts to Equity at the end of the lease term.
- The tractor has a six-year economic life.
- Morey has an excellent credit rating.
- Equity offers no warranty on the tractor other than the manufacturer’s two-year warranty that is handled directly with the manufacturer.
For Equity Leasing, this is treated as a(n)
Multiple Choice
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Business Its Legal Ethical & Global Environment
Accounting
ISBN:
9781305224414
Author:
JENNINGS
Publisher:
Cengage
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Business Its Legal Ethical & Global Environment
Accounting
ISBN:
9781305224414
Author:
JENNINGS
Publisher:
Cengage
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning