Business, 08.10.2020 09:01 itzzarosario12
Baillie Power leased high-tech electronic equipment from Courtney Leasing on January 1, 2021. Courtney purchased the equipment from Doane Machines at a cost of $250,000, its fair value. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Related Information:
Lease term 2 years (8 quarterly periods)
Quarterly lease payments $15,000 at Jan. 1, 2021, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter
Economic life of asset 5 years
Interest rate charged by the lessor 8%
Required:
1) Determine the lease type for Baillie Power and explain why.
2) Prepare a lease amortization schedule and appropriate entries for Baillie Power from the beginning of the lease through December 31, 2021. December 31 is the fiscal year end for each company. Appropriate adjusting entries are recorded at the end of each quarter.
3) What will be the effect of the lease on Baillie Power's earnings for the first year (ignore taxes)?
4) What will be the balance in the balance sheet accounts of Baillie Power related to the lease at the end of the first year (ignore taxes)?
Answers: 1
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Baillie Power leased high-tech electronic equipment from Courtney Leasing on January 1, 2021. Courtn...
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