Carla Vista Corporation ("Carla Vista") manufactures equipment with an estimated economic life of 13 years....
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Carla Vista Corporation ("Carla Vista") manufactures equipment with an estimated economic life of 13 years. On May 30, 2023, Carla Vista leases it to Gadget Corporation ("Gadget") for a period of 10 years. Details of the lease are as follows: - Equipment has a fair value and cost at the inception of the lease: $233,755. - Guaranteed residual value: $28,000. - Annual lease payment, due at beginning of each year: $34,250. - Lease contains no renewal options and the equipment reverts to Carla Vista at the end of the lease. - Gadget's incremental interest rate, as well as implicit rate is 11%. - Gadget uses straight-line depreciation for similar equipment that it owns. - Carla Vista has determined that collectibility of lease payments is reasonably predictable and that no additional costs will be incurred. Assume both companies follow ASPE
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