E21-8 The following facts pertain to a noncancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee.
Inception date: May 1, 2014
Annual lease payment due at the beginning of
each year, beginning with May 1, 2014 $21,227.60
Bargain-purchase option price at end of lease term $4,000
Lease term 5 years
Economic life of leased equipment 10 years
Lessor’s cost $65,000
Fair value of asset at May 1, 2014 $91,000
Lessor’s implicit rate 10%
Lessee’s incremental borrowing rate 10%
The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs.
Prepare a lease amortization schedule for Rode Company for the 5-year lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25125 and Round answers to 2 decimal places, e.g. 15.25.)
RODE COMPANY (Lessee)Lease Amortization Schedule
Annual Lease Payment PlusBPO
Reduction of LeaseLiability
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