Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. on january 1, lessor company leases equipment to l

On January 1, Lessor Company leases equipment to Lessee Company. The lease term is 8...

80.2K

Verified Solution

Question

Accounting

On January 1, Lessor Company leases equipment to Lessee Company. The lease term is 8 years; the economic life of the asset is 12 years. The cost of the equipment is $36,000; its fair value is $61,000. Lessors implicit rate is 7%; Lessees incremental borrowing rate is 7%. Lease payments of $9000 are due at the beginning of each year (PV $57,510). At the end of the lease term, the asset is expected to have a residual value of $6000 (PV $3492), none of which is guaranteed by Lessee.

Which of the following is true?

a. CGS for Lessor is $36,000.

b. Sales revenue for Lessor is $61,000.

c. Interest expense for Lessee at the end of the first year is the beginning liability times 7%.

d. Interest expense for Lessee at the end of the first year is the ending liability times 7%.

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

Q

The following balances were taken from the books of ShamrockCorp. on December 31, 2017.Interest...The...

Accounting
Q

Explain the difference between two independent samples and two dependent samples. Provide examples of each type of...

Basic Math
Q

Suppose the lengths of the pregnancies of a certain animal are approximately normally distributed with mean...

Basic Math
Q

You want to buy a car, and a local bank will lend you $35,000. The loan...

Finance
Q

Compare transformational leadership and transactional leadership. Look at the organizations you belong to that may provide you...

Psychology
Q

1. Management notes that the contribution from one product is higher thanthe contribution from a...

Accounting
Q

The Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method...

Accounting
Q

New answer please. The one alreafy posted is unclear. Pension...

Accounting
Q

A machine that cost $608,000 is acquired on October 1, 2025. Its estimated salvage value...

Accounting
Q

Carla Vista Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold...

Accounting
Q

Computing Cost of Sales and Ending Inventory Stocken Company has the following financial records for...

Accounting
Q

Requirements a. Purchased materials on account, $500,000 b. Requisitioned direct materials and used direct labor...

Accounting