Watson Co. entered into a lease arrangement for a truck on 1 April 20X2 that had the following terms: • The lease payments are $13,400 per year, payable each 1 April for four years. The lease may be renewed at the option of the lessor for a further five years for $4,000 per year. • Based on an allocation of the lease payment on relative stand-alone prices, the lease and non-lease components (maintenance) are $12,100 and $1,300 respectively. Expected amounts to be paid under the residual value guarantee are $11,400 if the lessee ends the lease at the end of the first lease term, and $3,800 if they end the lease at the end of the second lease term. • The leased asset has a useful life of ten years and a fair value of $64,000. The Interest rate Implicit in the lease is 8%. .

Watson Co. entered into a lease arrangement for a truck on 1 April 20X2 that had the following terms: • The lease payments are $13,400 per year, payable each 1 April for four years. The lease may be renewed at the option of the lessor for a further five years for $4,000 per year. • Based on an allocation of the lease payment on relative stand-alone prices, the lease and non-lease components (maintenance) are $12,100 and $1,300 respectively. Expected amounts to be paid under the residual value guarantee are $11,400 if the lessee ends the lease at the end of the first lease term, and $3,800 if they end the lease at the end of the second lease term. • The leased asset has a useful life of ten years and a fair value of $64,000. The Interest rate Implicit in the lease is 8%. .

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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