Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. just need help with these questions rauch incorpo

Just need help with these questions Rauch Incorporated leases a piece of equipment to...

90.2K

Verified Solution

Question

Accounting

Just need help with these questions

Rauch Incorporated leases a piece of equipment to Donahue Corporation on January 1, 2020. The lease agreement called for annual rental payments of $4,892 at the beginning of each year of the 4-year lease. The equipment has an economic useful life of 6 years, a fair value of $25,000, a book value of $20,000, and both parties expect a residual value of $8,250 at the end of the lease term, though this amount is not guaranteed. Rauch set the lease payments with the intent of earning a 5% return, and Donahue is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.

1) Explain how a bargain renewal option for one extra year at the end of the lease term would change the accounting of the lease for Donahue.

2) Explain how a bargain renewal option for one extra year at the end of the lease term would change the accounting of the lease for Rauch, the lessor.

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Finance
1.2K views

What are several human traits that tend to affect investment decisions?

Medical Sciences
1.2K views

a diagram with written steps showing the different components of skeletal muscle and how these interact to...

Psychology
1.2K views

In the United States, which plays a more significant role in political behavior, gender or race? Explain.

Accounting
1.2K views

Prepare a balance sheet as of December 31, 2019. BUSINESS SOLUTIONS Balance Sheet December 31, 2019 Assets Cash Accounts receivable Prepaid insurance Prepaid...

Physics
1.2K views

53 When an oscillator completes 100 oscillations its amplitude reduced to 1 of initial value...

Physics
1.2K views

Two objects one sliding down from rest on a smooth frictionless slope the other being...

Algebra
1.2K views

Express 0 0000018 in scientific notation O 1 8 x 106 O 18 x 10...

Algebra
1.2K views

5 Rewrite the general form of the circle below into graphing form Identify the center...

Accounting
1.2K views

Fulbright Corporation uses the periodic inventory system. During its first year of operations, Fulbright made...

Accounting
1.2K views

Depreciation by two methods A Kubota tractor acquired on lanuary 8 at a cost of...

Accounting
1.2K views

Is there a rational set of criteria in deciding whether or not) to outsource

Accounting
1.2K views

Prepare summary journal entries to record the following transactions for a company in its first...