The following facts pertain to a non-cancelable lease agreement between Ivanhoe Leasing Company and Cullumber Company, a
lessee.
Commencement date January 1, 2025
Annual lease payment due at the beginning of
each year, beginning with January 1, 2025 $121,571
Residual value of equipment at end of lease term,
guaranteed by the lessee $54,000
Expected residual value of equipment at end of lease term $49,000
Lease term 6 years
Economic life of leased equipment 6 years
Fair value of asset at January 1, 2025 $641,000
Lessor's implicit rate 8 %
Lessee's incremental borrowing rate 8 %
The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.
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(a)
Your answer is partially correct.
Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations
to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places e.g. 5,275.)
Annual Lease
Payment Plus GRV
CULLUMBER COMPANY (Lessee)
Lease Amortization Schedule
Interest on
Liability
Reduction of Lease
Liability
Lease Liability
0
$ 0 $ 0 $ 683594
121571 121571 562023
121571 44962 76609 485414
121571
121571
121571
121571
$ $