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

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Accounting

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

Required:

  1. Determine the annual lease payments that Garrison will chargeJasper. Round to the nearest $.
  2. What kind of lease is this for Garrison and for Jasper? Be sureto tell me what lease criteria are met and why.
  3. Prepare an amortization schedule for the first two years of thelease.
  4. Prepare the journal entries on January 1, 20X1, December 31,20X1 and January 1, 20X2 and December 31, 20X2 on:
  1. Garrison’s books
  2. Jasper’s books

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