Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. on january 1, 2020, bensen company leased equipmen

On January 1, 2020, Bensen Company leased equipment to Flynn Corporation. The following information pertains...

70.2K

Verified Solution

Question

Accounting

On January 1, 2020, Bensen Company leased equipment to Flynn Corporation. The following information pertains to this lease.

1. The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $1,000, while the expected residual value at the end of the lease is $5,000.
2. Equal rental payments are due on January 1 of each year, beginning in 2020.
3. The fair value of the equipment on January 1, 2020, is $150,000, and its cost is $120,000.
4. The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis.
5. Bensen set the annual rental to ensure a 5% rate of return. Flynns incremental borrowing rate is 6%, and the implicit rate of the lessor is unknown.
6. Collectibility of lease payments by the lessor is probable.

Both the lessor and the lessees accounting periods end on December 31.Calculate the amount of the annual rental payment. (Round answer to 0 decimal places, e.g. 5,275.)

Annual rental payment $

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