Larkspur Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement. Please answer part (b) in the image shown and fill in the entries for 12/31/25 as everything else is done already. Please fill in the remaining boxes shown. Thank you! 1.   The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2.   The cost of the asset to the lessor is $401,000. The fair value of the asset at January 1, 2020, is $401,000. 3.   The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $22,050, none of which is guaranteed.

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Larkspur Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement. Please answer part (b) in the image shown and fill in the entries for 12/31/25 as everything else is done already. Please fill in the remaining boxes shown. Thank you!

1.   The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years.
2.   The cost of the asset to the lessor is $401,000. The fair value of the asset at January 1, 2020, is $401,000.
3.   The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $22,050, none of which is guaranteed.
4.   The agreement requires equal annual rental payments, beginning on January 1, 2020.
5.   Collectibility of the lease payments by Larkspur is probable.
(b)
Your answer is partially correct.
Prepare an amortization schedule that is suitable for the lessor for the lease term. (Round answers to 0 decimal places e.g. 5,275.)
LARKSPUR LEASING COMPANY (Lessor)
Lease Amortization Schedule
Annual Lease Payment Plus
Interest on Lease
Recovery of Lease
Date
URV
Receivable
Receivable
1/1/20
2$
i
$
$
1/1/20
82883
82883
1/1/21
82883
34993
47890
1/1/22
82883
29725
53158
1/1/23
82883
23878
59005
1/1/24
82883
17387
65496
1/1/25
82883
10182
72701
12/31/25
11789
$
$
%24
%24
%24
Transcribed Image Text:(b) Your answer is partially correct. Prepare an amortization schedule that is suitable for the lessor for the lease term. (Round answers to 0 decimal places e.g. 5,275.) LARKSPUR LEASING COMPANY (Lessor) Lease Amortization Schedule Annual Lease Payment Plus Interest on Lease Recovery of Lease Date URV Receivable Receivable 1/1/20 2$ i $ $ 1/1/20 82883 82883 1/1/21 82883 34993 47890 1/1/22 82883 29725 53158 1/1/23 82883 23878 59005 1/1/24 82883 17387 65496 1/1/25 82883 10182 72701 12/31/25 11789 $ $ %24 %24 %24
Your answer is correct.
Assuming the lessor desires a 11% rate of return on its investment, calculate the amount of the annual rental payment required.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided and the final answer to O decimal places e.g.
5,275.)
Amount of the annual rental payment
$
82883
%24
Transcribed Image Text:Your answer is correct. Assuming the lessor desires a 11% rate of return on its investment, calculate the amount of the annual rental payment required. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and the final answer to O decimal places e.g. 5,275.) Amount of the annual rental payment $ 82883 %24
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