On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,525 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. (a) What is the nature of this lease to Skysong Company? This lease is a(n) select a type of lease . eTextbook and Media List of Accounts
On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,525 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. (a) What is the nature of this lease to Skysong Company? This lease is a(n) select a type of lease . eTextbook and Media List of Accounts
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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...
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33.
On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms:
1. | Noncancelable term of 4 years. | |
2. | Rental of $8,525 per year (at beginning of each year). | |
3. | Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. | |
4. | Estimated economic life of the machine is 5 years. | |
5. | Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. |
(a)
What is the nature of this lease to Skysong Company?
This lease is a(n) select a type of lease . |
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