Bonita Leasing Company signs a lease agreement on January 1,2017, to lease electronic equipment...

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Accounting

Bonita Leasing Company signs a lease agreement on January 1,2017, to lease electronic equipment to Windsor Company. The term ofthe noncancelable lease is 2 years, and payments are required atthe end of each year. The following information relates to thisagreement: 1. Windsor Company has the option to purchase theequipment for $17,100 upon termination of the lease. 2. Theequipment has a cost and fair value of $166,000 to Bonita LeasingCompany. The useful economic life is 2 years, with a salvage valueof $17,100. 3. Windsor Company is required to pay $4,900 each yearto the lessor for executory costs. 4. Bonita Leasing Companydesires to earn a return of 10% on its investment. 5.Collectibility of the payments is reasonably predictable, and thereare no important uncertainties surrounding the costs yet to beincurred by the lessor.

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3.8 Ratings (421 Votes)

Year PV Factor 10 1 090909 2 082645 Total 173554 Present Value of Lease Cost Fair Value of leased asset 166000 Less Present value of salvage value 17100082645 14132 Present value of annual payments 151868 Divided by PV Annuity Factor 10 for 2 Years 173554 Amount of Lease payment See Answer

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In: AccountingBonita Leasing Company signs a lease agreement on January 1,2017, to lease electronic equipment to...Bonita Leasing Company signs a lease agreement on January 1,2017, to lease electronic equipment to Windsor Company. The term ofthe noncancelable lease is 2 years, and payments are required atthe end of each year. The following information relates to thisagreement: 1. Windsor Company has the option to purchase theequipment for $17,100 upon termination of the lease. 2. Theequipment has a cost and fair value of $166,000 to Bonita LeasingCompany. The useful economic life is 2 years, with a salvage valueof $17,100. 3. Windsor Company is required to pay $4,900 each yearto the lessor for executory costs. 4. Bonita Leasing Companydesires to earn a return of 10% on its investment. 5.Collectibility of the payments is reasonably predictable, and thereare no important uncertainties surrounding the costs yet to beincurred by the lessor.