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On January 1, Year 1, Kristoph Enterprises manufactured a piece of equipment with a cost...

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Accounting

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On January 1, Year 1, Kristoph Enterprises manufactured a piece of equipment with a cost of $325,000 and a fair value of $412,500. On that date, Kristoph Enterprises leases the asset to Valera Mango Company at fair value for a 4-year term at an interest rate of 9%. The annual lease payment is due at the beginning of each year, and the first payment is to be collected at the inception date. The leased asset will revert back to Kristoph Enterprises at the end of the lease term. The equipment has an estimated residual value of $15,000 which is not guaranteed by the lessee. The asset has an estimated useful life of 4 years. Both Kristoph Enterprises and Valera Mango Company have a calendar-year reporting period. Part 2. Go back to the original set of facts with one exception: Assume that the asset has an estimated residual value of $15,000, which is guaranteed by the lessee. The lessee expects the fair value of the asset to be $8,500 at the end of the lease. 1A. Compute the amount of the annual lease payments to be collected by the lessor. 1B. Prepare the amortization schedule for this lease for the Lessor and Lessee

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