lanigans Company leases a building to Wellington, Inc. on January 1, 2025. The following facts pertain to the lease agreement. 1. 2. 3. 4. 5. The lease term is 6 years, with equal annual rental payments of $7,652 at the beginning of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The building has a fair value of $42,000, a book value to Flanigans of $37,000, and a useful life of 7 years. At the end of the lease term, Flanigans and Wellington expect there to be an unguaranteed residual value of $3,000. Flanigans wants to earn a return of 6% on the lease, and collectibility of the payments is probable. Wellington was unawai the implicit rate used in the lease by Flanigans and has an incremental borrowing rate of 8%.

lanigans Company leases a building to Wellington, Inc. on January 1, 2025. The following facts pertain to the lease agreement. 1. 2. 3. 4. 5. The lease term is 6 years, with equal annual rental payments of $7,652 at the beginning of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The building has a fair value of $42,000, a book value to Flanigans of $37,000, and a useful life of 7 years. At the end of the lease term, Flanigans and Wellington expect there to be an unguaranteed residual value of $3,000. Flanigans wants to earn a return of 6% on the lease, and collectibility of the payments is probable. Wellington was unawai the implicit rate used in the lease by Flanigans and has an incremental borrowing rate of 8%.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...

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