80.2K

Verified Solution

Link Copied!

Current Attempt in Progress

Laura Leasing Company signs an agreement on January $1,2025,$ to lease equipment to Plote Company. The following information relates to this agreement.

The term of the non$-$cancelable lease is $3$ years with no renewal option. The equipment has an estimated economic life of $5$ years.

The fair value of the asset at January $1,2025,$ is $$80,000.$

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 $$7,000,$ none of which is guaranteed.

The agreement requires equal annual rental payments of $$25,562\mathrm{.}96$ to the lessor, beginning on January $1,2025.$

The lessee's incremental borrowing rate is $5\%.$ The lessor's implicit rate is $4\%$ and is unknown to the lessee.

Plote uses the straight$-$line depreciation method for all equipment.

Click here to view factor tables.

$($For calculation purposes, use $5$ decimal places as displayed in the factor table provided.$)$

Your answer is partially correct.

Prepare an amortization schedule that would be suitable for the lessee for the lease term. $($Round answers to $2$ decimal places, e$.$g$.5,275\mathrm{.}15.)$ Your answer is partially correct.

Entry" for the account titles and enter $0$ for the amounts. Round answers to $2$ decimal places, e$.$g$.5,275\mathrm{.}15.$ Record journal entries in the order presented in the problem.$)$

$($To record amortization of the right$-$of$-$use asset$)$

Show all imagesShow all images

Answer & Explanation Solved by verified expert

See Answer