000, and the fair value of the asset on January 1, 2020, is $737,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Blue estimates that the expected residual value at the end of the lease term will be 60,000. Blue amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annu
000, and the fair value of the asset on January 1, 2020, is $737,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Blue estimates that the expected residual value at the end of the lease term will be 60,000. Blue amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annu
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 17MCQ: Which of the following statements regarding the new accounting rules, which take effect in 2019, for...
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Blossom Leasing Company agrees to lease equipment to Blue 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 $520,000, and the fair value of the asset on January 1, 2020, is $737,000. | |
3. | At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Blue estimates that the expected residual value at the end of the lease term will be 60,000. Blue 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. | Blossom desires a 10% rate of |
(Assume the accounting period ends on December 31.)
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