Rand Medical manufactures lithotripters. Lithotri Leasing purchased a lthotripte
ID: 2537243 • Letter: R
Question
Rand Medical manufactures lithotripters. Lithotri Leasing purchased a lthotripter from Rand for $2,260,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2018. FV of S1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $) (Use approprlate factorls) from the tables provided.) Urologists Group, Inc., on January 1, 2018. (FV of Quarterly lease payments Lease term No residual valué: no purchase option Econonic life of lithotripter 135,504-beginning of each period 5 years (20 quarters) 5 years licit interest rate and lessee's incremental borrowing a rate Fair value of asset $2,260,000 Required: 1. How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing? 2. Prepare appropriate entries for both Mid-South Urologists Group and Physicians' Leasing from the beginning of the lease through the second rental payment on April 1, 2018. Adjusting entries are recorded at the end of each fiscal year (December 3) 3. Assume Mid-South Urologists Group leased the lithotripter directy from the manufacturer, Rand Medical, which produced the machine at a cost of $1.9 million. Prepare appropriate entries for Rand Medical from the beginning of the lease through the second lease payment on April 1, 2018 Complete this question by entering your answers in the tabs below Required 2 Lessee Required 2 Lessor Required 3 How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing? Mid-South Urologists Group Physicians' Leasing Required 2 LesseeExplanation / Answer
Since (a) the term of the lease is equal to the economic life of the asset and
(b) the fair value of the lease payments and the fair value of the cost of the asset are almost equal ,
the lease is to be classified as a 'Capital Lease'.
The present value of the lease rentals is calculated as shown below.
2.
3.
135504 x (1-(1/(1.02)^20)/0.02) x (1.02) 135504 x ((1-0.6730)/0.02) x 1.02 135504x (16.3514)x1.02 2260000 (rounded off)Related Questions
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