Question

Garrison, Inc. purchased an asset for $63,282 and negotiated a non-cancelable lease with Jasper Corporation on...

Garrison, Inc. purchased an asset for $63,282 and negotiated a non-cancelable lease with Jasper Corporation on January 1, 20X1. Jasper will lease the asset from Garrison over a 10-year lease period with annual payments beginning January 1, 20X1. The expected economic life of the asset is 12 years. Title does not transfer to the lessee, Jasper, and there is no purchase option or guaranteed residual value. Assume Garrison’s implicit rate in the lease and Jasper’s incremental borrowing rate are both 12%.

Required:

1. Determine the annual lease payments that Garrison will charge Jasper. Round to the nearest $.

2. What kind of lease is this for Garrison and for Jasper? Be sure to tell me what lease criteria are met and why.

3. Prepare an amortization schedule for the first two years of the lease.

4. Prepare the journal entries on January 1, 20X1, December 31, 20X1 and January 1, 20X2 and December 31, 20X2 on:

a. Garrison’s books

b. Jasper’s books

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On December 31, 2016, Tamarisk Corporation signed a 5-year, non-cancelable lease for a machine. The terms...
On December 31, 2016, Tamarisk Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Tamarisk to make annual payments of $8,978 at the beginning of each year, starting December 31, 2016. The machine has an estimated useful life of 6 years and a $5,200 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Tamarisk uses the straight-line method of depreciation for all of its plant...
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Sunland Company....
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Sunland Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2020, is $71,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset...
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Kingbird Company....
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Kingbird Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2020, is $75,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset...
On January 2, 2020, Micheal (lessee) entered into a 10-year non-cancelable lease with Thomas (lessor) for...
On January 2, 2020, Micheal (lessee) entered into a 10-year non-cancelable lease with Thomas (lessor) for equipment. The following facts relate to the transaction: -The equipment has an estimated useful life of 13 years. -There is no purchase option. Transfer of ownership to Michael is not stipulated in the lease contract. -The fair value to Thomas (lessor) at the inception of the lease was $4,000,000. Lessor's cost was $3,775,000. Sales commissions were $2,500. -Michael's incremental borrowing rate is 10%. The...
On December 31, 2019, JB Corporation signed a 6-year, non-cancelable lease for a machine. The terms...
On December 31, 2019, JB Corporation signed a 6-year, non-cancelable lease for a machine. The terms of the lease called for JB to make annual payments of $12,108 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 8 years and a $6,000 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. JB uses the straight-line method of depreciation for all of its plant...
On December 31, 2016, Sage Hill Corporation signed a 5-year, non-cancelable lease for a machine. The...
On December 31, 2016, Sage Hill Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Sage Hill to make annual payments of $8,026 at the beginning of each year, starting December 31, 2016. The machine has an estimated useful life of 6 years and a $4,900 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Sage Hill uses the straight-line method of depreciation for all...
On January 1, 2017, the Millwork Company signed a four-year non-cancelable lease of equipment from the...
On January 1, 2017, the Millwork Company signed a four-year non-cancelable lease of equipment from the Midford Company. The annual lease payments of $35,000 are to be paid on January 1 of each year. The first payment is due on January 1, 2017. The lease contains a bargain purchase option price of $15,000. The equipment's fair value is expected to be $30,000 on December 31, 2020. The estimated economic life of the equipment is six years, and the estimated residual...
The following facts are for a non-cancellable lease agreement between Alpha Corporation and Beta Corporation, a...
The following facts are for a non-cancellable lease agreement between Alpha Corporation and Beta Corporation, a lessee: Inception Date July 1, 2018 Annual lease payment due at the beginning of each year, starting July 1, 2018 $20,066.26 Purchase option price at end of lease term reasonably certain to be exercised by Beta $4,500.00 Lease term 5 years Economic life of leased equipment 10 years Lessor’s cost $60,000.00 Fair value of asset at July 1, 2018 $88,000.00 Lessor’s implicit rate 9%...
LSU Company signs an agreement on January 1, 2009, to lease equipment to Tiger Corporation. The...
LSU Company signs an agreement on January 1, 2009, to lease equipment to Tiger Corporation. The following information relates to this agreement: The term of the non cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. The cost of the asset to the lessor is $245,000. The fair value of the asset on January 1, 2009, is $245,000. The asset will revert to the lessor at the end of the...
on January 2, 20X7, Rocky leased additional equipment. The terms of the lease includes a non-cancelable...
on January 2, 20X7, Rocky leased additional equipment. The terms of the lease includes a non-cancelable lease term of 6 years, which is also the estimated useful life of the equipment. The lease agreement specifies annual payments of $100,000, beginning at the inception of the lease and continuing each December 31 through 20X1. The appropriate interest rate is 9%. The present value factor for an annuity due for 6 periods at 9% is 4.88965. Also on December 31, 20X7, Rocky...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT