The following facts pertain to a non-cancelable lease agreement between Teal Mountain Leasing Company and...
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Finance
The following facts pertain to a non-cancelable lease agreement between Teal Mountain Leasing Company and Sandhill Company, a lessee.
Commencement date
May 1, 2017
Annual lease payment due at the beginning of
each year, beginning with May 1, 2017
$19,656.69
Bargain purchase option price at end of lease term
$7,000
Lease term
5
years
Economic life of leased equipment
10
years
Lessors cost
$65,000
Fair value of asset at May 1, 2017
$93,000
Lessors implicit rate
6
%
Lessees incremental borrowing rate
6
%
The collectibility of the lease payments by Teal Mountain is probable.
Compute the amount of the lease receivable at commencement of the lease.
Prepare a lease amortization schedule for Teal Mountain for the 5-year lease term.
Prepare the journal entries to reflect the signing of the lease agreement and to record the receipts and income related to this lease for the years 2017 and 2018. The lessors accounting period ends on December 31. Reversing entries are not used by Teal Mountain
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