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In: AccountingPepper, Inc. agrees to lease equipment from the Blue Corporationfor 10 years at $25,000 at...Pepper, Inc. agrees to lease equipment from the Blue Corporationfor 10 years at $25,000 at the end of each year. The equipment hasa fair value of $175,000 and an estimated useful life of 10 years.The lease includes a guaranteed residual value of $10,000. Inaddition to the lease payments, Pepper will pay $5,000 per year fora maintenance agreement. Pepper can finance this lease with itsbank at a 12% rate. The lessor’s implicit lease rate, known to thelessee, is 10%. The lessor and the lessee use ASC 840 guidelinesfor lease accounting. Present value interest factors are: 10% 12%PV factor of $1 for 10 periods 0.38554 0.32197 PV factor forordinary annuity for 10 periods 6.14457 5.65022