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Lessee Company enters into a 6-year finance lease of non-specialized equipment with Lessor Company on...

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Accounting

Lessee Company enters into a 6-year finance lease of non-specialized equipment with Lessor Company on January 1. Lessee has agreed to pay $56,000 annually beginning immediately on January 1. The lessor estimates the residual value of the equipment to be $10,000 at lease end, and the lessee guarantees the residual value. The economic life of the asset is 7 years. The lessees incremental borrowing rate is 7% and the lessors implicit rate is not readily determinable by the lessee company.

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