The following facts pertain to a noncancelable lease agreement between Saturn Le

Question

The following facts pertain to a noncancelable lease agreement between Saturn Leasing Corporation and New Land Company, a lessee October 1, 2017 Inception date Annual lease payment due at the beginning $31,415.63 $5,000.00 6 years 12 years $120,000.00 of each year, beginning with October 1, 2017 Bargain purchase option price at end of lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at October 1, 2017 Lessor's implicit rate (not known by lessee) Lessee's incremental borrowing rate $160,000.00 8% 6% The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs

Explanation / Answer

Present Value working:

Amortization Schedule (this will be help for journal):

JOurnal Entries:

Year PV 6% 6 Year 0 1.0000 1 0.9434 2 0.8900 3 0.8396 4 0.7921 5 0.7473 5 31416 163750 6 0.7050 1 5000 3525 Present Value 167274

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