Windsor Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $301,000. The fair value of the asset at January 1, 2020, is $301,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $31,010, none of which is guaranteed. 4. The agreement requires equal annual rental payments, beginning on January 1, 2020. 5. Collectibility of the lease payments by Windsor is probable. A. Assuming the lessor desires a 8% rate of return on its investment, calculate the amount of the annual rental payment required.
Windsor Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $301,000. The fair value of the asset at January 1, 2020, is $301,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $31,010, none of which is guaranteed. 4. The agreement requires equal annual rental payments, beginning on January 1, 2020. 5. Collectibility of the lease payments by Windsor is probable. A. Assuming the lessor desires a 8% rate of return on its investment, calculate the amount of the annual rental payment required.
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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Windsor Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement.
| 1. | The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. | |
| 2. | The cost of the asset to the lessor is $301,000. The fair value of the asset at January 1, 2020, is $301,000. | |
| 3. | The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $31,010, none of which is guaranteed. | |
| 4. | The agreement requires equal annual rental payments, beginning on January 1, 2020. | |
| 5. | Collectibility of the lease payments by Windsor is probable. |
A. Assuming the lessor desires a 8%
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