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Timmy Incorporated leases a piece of equipment to Apple Corporation on January 1, 2017. 1. Lease term...

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Accounting

Timmy Incorporated leases a piece of equipment to AppleCorporation on January 1, 2017.

1. Lease term in years. 4

2. Fair Value of equipment 25,100

3. Book Value of equipment 20,100

4. Lease agreement requires equal annual lease payments,beginning on January 1, 2017 $4,952

Assume accounting periods ends December 31.

5. Estimated economic life of the equipment in years 6

Unguaranteed Residual Value at end of lease term $8100

Expected Residual Value at end of lease term. $8100

6. Lessor and Lessee use straight-line depreciation for allassets.

7. Apple incremental rate of interest. 8%

Timmy implicit rate of interest ( Known to Apple) 5%

8. There is no bargain purchase option, ownership of the leasedoes not transfer at the end of the lease term, and the asset isnot of a specialized nature.

Calculate depreciation expense for the lessor.

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