Exercise 21-5 Indigo Leasing Company leases a new machine that has a cost and fa

Question

Exercise 21-5 Indigo Leasing Company leases a new machine that has a cost and fair value of $82,000 to Sharrer Corporation on a 3-year noncancelable contract. Sharrer Corporation agrees to assume all risks of normal ownership including such costs as insurance, taxes, and maintenance. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2017. Indigo Leasing Company expects to earn a 10% return on its investment. The annual rentals are payable on each (b) Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (Round present value factor calculations to 5 decimal places, e.g 1.25124 and the final answer to O decimal places e.g. 58,971.) Click here to view factor tables Rent Receipt/Interest Revenue/ Reduction of Principal Receivable/ Liability Payment Expense 12/31/17 12/31/18 12/31/19 Question Attempts: O of 2 used

Explanation / Answer

Annual payment received = Fair value / PVA10%,3

            = 82000/ 2.48685

           = $ 32973.(rounded)

Rent receipt/payment Interest revenue/expense Reduction of principal Receivable /liability 1/1/17 82000 31/12/17 32973 8200   [82000*.10] 32973-8200=24773 82000-24773= 57227 31/12/18 32973 5723 32973-5723= 27250 57227-27250= 29977 31/12/19 32973 2996**rounded [29977*.10] 32973-2996= 29977 0

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