The following facts pertain to a noncancelable lease agreementbetween Sheffield Leasing Company and Tamarisk Company, alessee.
Inception date:
May 1, 2017
Annual lease payment due at the beginning of
each year, beginning with May 1, 2017
$21,197.82
Bargain-purchase option price at end of lease term
$4,200
Lease term
5
years
Economic life of leased equipment
10
years
Lessor’s cost
$71,000
Fair value of asset at May 1, 2017
$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 yetto be incurred by the lessor. The lessee assumes responsibility forall executory costs.
Prepare a lease amortization schedule for Tamarisk Company forthe 5-year lease term.
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