Nash Limited has signed a lease agreement with Lantus Corp. to lease equipment with an...
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Nash Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $217,000. The terms of the lease are as follows:
| The lease term begins on January 1, 2019, and runs for 5 years. | ||
| The lease requires payments of $48,599 at the beginning of each year starting January 1, 2019. | ||
| At the end of the lease term, the equipment is to be returned to the lessor. | ||
| Lantus implied interest rate is 6%, while Nashs borrowing rate is 7%. Nash uses straight-line depreciation for similar equipment. The year-end for both companies is December 31. |
Assume that both companies follow ASPE.
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