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Company 1, as lessee, enters into a lease agreement on January 1, 2018, for equipment. The following data are relevant to the lease agreement:The...
Company 1, as lessee, enters into a lease agreement on January 1, 2018, for equipment. The following data are relevant to the lease agreement:
1. The term of the noncancelable lease is 4 years. Payments of $4,892 are due on January 1 of each year.
2. The fair value of the equipment on January 1, 2018 is $25,000 and the book value is 20,000. The equipment has an economic life of 6 years. Both parties expect the equipment to have an unguaranteed residual value of $8,250 at the end of the lease term. The equipment reverts to the lessor at the end of the lease term. The equipment is not of a specialized nature and there is no purchase option.
