Business, 24.04.2021 01:00 MartinTDL

Sarasota Corporation entered into a lease agreement on January 1, 2020, to provide Ivanhoe Company with a piece of machinery. The terms of the lease agreement were as follows. 1. The lease is to be for 3 years with rental payments of $13,319 to be made at the beginning of each year. 2. The machinery has a fair value of $64,000, a book value of $40,000, and an economic life of 8 years. 3. At the end of the lease term, both parties expect the machinery to have a residual value of $30,000, none of which is guaranteed. 4. The lease does not transfer ownership at the end of the lease term, does not have a bargain purchase option, and the asset is not of a specialized nature. 5. The implicit rate is 6%, which is known by Ivanhoe. 6. Collectibility of the payments is probable. Click here to view factor tables. Correct answer iconYour answer is correct. Evaluate the criteria for classification of the lease, and describe the nature of the lease. For the lessee, it is a operating lease , and for the lessor, it is a operating lease . Partially correct answer iconYour answer is partially correct. Prepare the amortization schedules Ivanhoe will use over the lease term.

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